As Trump Built His Real Estate Empire, Tax Breaks Played A Pivotal Role
For a young Donald Trump in the 1970s, the Grand Hyatt hotel on East 42nd Street was his first major development project, a chance to make a splash in the big-time world of New York City real estate.
Yet the glitzy glass-fronted hotel never would have been possible without an almost unprecedented 40-year tax abatement from the city, which was then recovering from a painful fiscal crisis.
“Essentially, what they did was, they said, ‘We’ll give you a massive cut in the property taxes you have to pay,” said Timothy O’Brien, author of TrumpNation: The Art of Being the Donald.
“The tax abatement was crucial. It was crucial to the finances of the deal making sense at the time it was struck. It was crucial to the banks who loaned him money to get it done,” O’Brien adds. “So in tandem all of those things were very important. It couldn’t have been done without them.”
Over the years, Trump has eagerly sought out federal, state and local tax breaks whenever possible, and they have added significantly to his bottom line. When he built Trump Tower on Fifth Avenue in the 1980s, he successfully sued the city to get a tax abatement on the property.
When he wasn’t seeking tax breaks, Trump was lobbying local governments to lower the appraised value of his hotels and casinos in order to reduce his property tax bill.
Although Trump has never released his tax returns, The New York Times estimated last year that he has gotten at least $885 million in tax breaks, grants and other subsidies for his properties in the city.
That doesn’t include the many breaks he got for his properties in Florida, New Jersey and Nevada.
“He’s had massive tax disputes in Palm Beach around Mar-a-Lago. He’s used various forms of tax arguments on his golf courses, looking for environmental easements and different definitions of how he was going to use the property in order to lower the cost,” O’Brien says.
Many cities see tax abatements as a way of encouraging development and fending off blight, although critics say they are sometimes handed out for properties that don’t really need them.
Getting a tax abatement isn’t illegal, and in fact they are part of the negotiations in real estate development deals all over the country. But in New York, at least, few developers have succeeded the way Trump has.
“Long before Trump ran for president, he was known in New York City as a developer who was consummate at finding and obtaining these tax breaks, even when these tax breaks weren’t specifically designed for his types of projects,” says Nicole Gelinas, senior fellow at the Manhattan Institute.
“If you look at what other developers have done over that same time period, what Trump did was unusual in scale but not unusual in type,” she adds.
Trump was able to take advantage of these breaks because local politicians allowed it, Gelinas notes.
“These were sophisticated city and state politicians who designed these programs much better. They could have designed them much better. They could have cracked down on the loopholes that Trump drove his bulldozers right through,” she says.
Still, Trump has often advocated a simpler tax code, free of the many loopholes and exemptions that make tax payments such a pain.
His own frequent use of tax breaks in his business dealings suggest he’s not above taking advantage of those breaks.
“For a candidate who has espoused the many virtues of the free market,” O’Brien says, “Donald Trump’s business wouldn’t be possible but for major government subsidies.”