Quote:
Originally Posted by nfotiu
It's a complicated topic that always seems to be discussed without any nuance.
If a billionaire is losing money every year, should he be paying taxes? Income is generally taxed, not wealth. Taxing wealth makes sense at some level, but every attempt to do so usually causes more problems than it creates.
Then there's the question if a pretend billionaire who owes more than he has should pay any kind of taxes.
It seems that Trump has always taken the position that he doesn't care about his actual wealth, and just enjoys using jets, mansions, penthouses to look rich and enjoy a rich lifestyle. He probably pushed the envelope on what is allowed by the tax code in that area, but it's a completely different issue than real wealthy people not paying a fair share of taxes.
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My problem specifically has to do with the way that real estate is taxed.
If you spend $10 million of your own money on real estate, you can take a small deduction on that property and depreciate it for 27 years. So basically $370,000 per year for 27 years straight.
Say your get $500,000 per year from your tenets, and $200,000 of that is allocated towards the cost of running the building and covering your yearly expenses. It means you have $300,000 left over. You simply deduct against the $370,000 each year, and show a $70,000 loss which allows you to avoid paying income taxes, but in reality your cash flow is fine and your asset value goes up each year.
Say the average growth rate of real estate is between 3-5% pear year, so after 10 years your asset has appreciated in value between 30-50%, so now that $10 million is now worth $15 million, and you sell your property you only worry about capital gains tax.
To me that seems massively unfair, and it is exactly what Trump and other large real estate holders are doing. I don't get why you should be able to depreciate against an asset that actually increases in value each year.
Same reason all the billionares are buying up massive amounts of land, farms and ranches. They can effectively reduce their tax exposure to radically low numbers because of the amounts you can depreciate and write off each year. Especially with land and the massive land taxes being owed.