Biden aims to put an end to generous billionaire and real estate deals
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- Mar 10, 2023
- 2 min read
It's possible that the federal government and the real estate industry won't remain inseparable for much longer.
In an effort to reduce budget deficits by nearly $3 trillion over the next decade, President Joseph Biden released a proposed 2024 budget on Thursday, in which he proposed eliminating tax breaks for real estate and private equity firms.
The Trump administration hopes to recoup around $19 billion by eliminating the "like-kind exchange," or 1031 exchange, which has been exploited by many corporations. As long as the real estate company invests in another property with similar characteristics, the capital gains tax on the sale of the first property can be deferred.
The Biden administration compared the tax break to an interest-free loan, saying the real estate industry was the only one benefiting from the federal government's generosity.
Top real estate executives would also be affected by other aspects of the budget, such as a minimum income tax of 25 percent on the top 0.01 percent of earners (also known as a billionaire's tax). Biden has also urged Congress to increase the income tax rate for those making over $400,000 annually or couples making over $450,000 annually from 37% to 39.6%.
The corporate income tax rate could be 28%, up from 21% currently but still significantly lower than the 35% that was anticipated from corporations prior to 2017.
When Biden took office in 2020, he discovered that 55 Fortune 500 companies had paid zero federal income tax on $40 billion in profit, he said in Thursday's remarks. There were about 650 billionaires in the United States when I took office. Currently, there are over a thousand. How much tax do you think they pay? There's a 3% increase... There shouldn't be any billionaires getting paid less than teachers or firefighters.
Instead, Biden's budget puts a focus on expanding the Low-Income Housing Tax Credit and funding programmes like the Neighborhood Homes Tax Credit, which his administration wants to fund with $16 billion over 10 years.
In addition, the proposed budget allocates $10 billion for housing capital grants and planning to help local and state governments implement reforms and streamline the construction of new affordable housing projects.
The budget allocates $175 billion to initiatives that could help with affordable housing construction and maintenance.
Biden also devotes significant funds to transit in the tri-state area.
Biden pledged approximately $700 million for the Hudson Tunnel Project, which has the potential to stabilize service on the Northeast Corridor in the long run, and $496 million for phase two of the Second Avenue Subway, which presents an opportunity for transit-oriented development.