Written by Paige Schiesser, Leasing Representative
As a representative of landlords and property owners, it’s important to understand how the 2016 presidential race will impact the commercial real estate industry. A few weeks ago, President Obama submitted his 2017 budget proposal to Congress. According to the NAIOP Commercial Real Estate Development Association, “no matter where one might fall on the political spectrum, from an objective viewpoint, the impact upon commercial real estate industry of some of the administration’s proposals would be severe if they were to become law.”
To name a few, there are severe limitations on Section 1031 Like-Kind exchanges, higher capital gains tax rates, Promotes/Carried Income to be taxed as ordinary income instead of capital gains and expansion of taxes from the Affordable Care Act to those classified as real estate professionals. While many of these policies are politically driven and are not ultimately approved by Congress, it is extremely concerning for our industry if anything similar were to ever be approved, or even continue to be proposed in future budgets.
Understanding each candidate’s stance on tax reform is key to determining how their policies will affect the real estate industry and its investors. The current GOP candidates are Donald Trump, Senator Ted Cruz, Senator Marco Rubio and Governor John Kasich. Ted Cruz’s tax plan includes at 16% Business Flat Tax, which would replace the corporate income tax and payroll taxes. Criticized by Rubio as a roundabout way to achieve a value added tax, Rubio is instead proposing a cap on business income of 25%, a 10% reduction (or 15.6% reduction if taking ObamaCare taxes into account). John Kasich, on the other hand, believes proposing an all-sector tax reduction as well as a reduction in long-term capital gains rates to 15% (currently 23.8%). According to Kasich’s website, in his history as Ohio Governor he has history with lowering taxes in Ohio by over $5B since 2011. The front runner, Donald Trump, is proposing a cap on business taxes at 15% (up to 21.6% reduction in rates), a sliding scale capital gains tax anywhere from 0% to 20% and the elimination of the carried interest loophole. Trump’s reform plan also includes a plan to bring back money being held overseas by imposing a fee and eliminating the deferral of taxes on corporate income earned abroad.
It will be very interesting to see how the 2016 presidential race continues to unfold. Hopefully we will see in the very near future how new political policies will make a positive impact on the commercial real estate industry.
Paige Schiesser | Leasing Representative
Mid-America Asset Management, Inc.
One Parkview Plaza, 9th Floor | Oakbrook Terrace, IL 60181
Direct: 630.954.7221 | Fax: 630.954.7306
firstname.lastname@example.org | www.midamericagrp.com