Taxes, politics, and real estate investing might not be as salacious as sex, lies and videotape … but it’s arguably just as intriguing.
By now we’re sure you’ve heard all the “outrage” about allegations the United States’ Real Estate Investor-in-Chief paid nearly no federal income tax.
This shocks no one who understands real estate or the tax code, but it’s sure to rile up those who don’t. Call us cynical, but we suspect this might be the plan.
We’re not here to pour gas on the fire … or defend or attack any candidate, party, platform, or policy. If we influence you, we hope it’s simply towards Education for Effective Action™.
After all, the tax code is a tool available to ANYONE willing to invest the time and effort to learn how to use it.
Of course, you probably already know this.
But this entire debate over what’s really in Donald Trump’s tax returns promises to push the incredible tax benefits real estate investors have enjoyed for decades …
… right into the mainstream media’s crosshairs …
… AND into the focus of nearly every moderately politically cognizant person during one of the most watched election cycles in history.
So before you put on your red, blue or orange face paint and cheer for your team and curse “the enemy” …
… let’s consider the potential challenges and opportunities of these unfolding events for all real estate investors … blue, red, green or yellow.
A Main Street Wake Up Call
The tussle over Trump’s tax returns is going to wake up a lot of people who have no idea the tax code allows real estate investors to legally reduce their taxes to nearly nothing.
Some will be outraged … at least outwardly. Most rational people will realize Trump didn’t write the tax code … he simply used it effectively.
Some people will be angry. Others jealous. Some suspicious.
But we’re guessing a big chunk of people will be curious enough to fact check the law … because it’s 2020 and they can.
And it won’t take long to find the key to tax-free wealth involves real estate.
Further, as more people discover the tax savings is legit and how to do it, we bet a lot of the newly aware will be looking to get in on the action.
Of course, not everyone will want to go out and become a hands-on real estate investor. Many busy and retired people still want the “Wall Street” convenience of passively investing with professional asset managers.
But when they find they can have their cake and eat it too ...
… it could create a surge of interest in real estate private placements or “syndications” …
… and an even better opportunity for real estate syndicators to attract capital.
In fact, one of the most successful alumni of our syndication training has been using the tax benefits of his deals to raise over $200 million in private funds.
Meanwhile, back to the political drama …
Calling Capitol Hill’s Bluff
As media fans the flame of tax-avoidance outrage … and opportunistic politicians myopically jump on the trash Trump bandwagon …
… the very politicians who created the tax laws Donald Trump and nearly every other well-advised real estate investor uses to legally reduce tax liability …
… could potentially face a lot of pressure to either defend them (at great political cost) or eliminate them.
In fact, in the first 2020 Presidential debate, Joe Biden claimed he would.
Of course, politicians of all colors are famous for making lots of promises and espousing policies they never actually follow through on.
We’ll let you decide which outcome you prefer, and which team is likely to push for it. Vote your conscience.
We’re just raising awareness so you can best prepare your portfolio … come what may.
What do we think will happen?
Well, since you asked …
When we look past the two teams on the field and the fiery rhetoric …
… we see a financial system which requires the unrelenting and perpetual expansion of debt.
We’ve explained this many times in the past, but in simple terms … any system which borrows its currency into existence at interest can ONLY repay by borrowing more.
If that’s confusing, just sit and think about it.
If you borrow $100 into existence at 10% annual interest to run your “economy” … no matter where the money ends up at the end of the year … the economy owes $110 (principal + interest).
The obvious problem is there’s only $100 in existence. The ONLY way to pay the interest and keep the economy going is to borrow MORE.
Spoiler alert: THAT is (apparently) THE plan. And (perhaps) all the rest is theater.
If this makes no sense to you, that’s because it makes no sense.
As we explained in our Future of Money and Wealth conference, it’s a faulty, unsustainable system.
Nonetheless, this is the system which was born in 1913 as a result of a secret meeting at Jekyll Island, Georgia. If you don’t know the story, it’s a great Halloween read.
But because the system is based on debt, the tax law encourages borrowing.
And because the best collateral for loans is real estate, it’s no surprise the best tax breaks are with real estate.
As CPA Tom Wheelwright has been telling us for years, the tax code is written to coerce people and businesses to do what the government wants.
And just in case you’ve heard the argument taxes are necessary to pay for government … there’s a different perspective from someone well-qualified to have an opinion …
Click here to read the transcript of a public speech given by a high-ranking Federal Reserve official who admits …
…income taxes are NOT necessary to pay for government… AND the tax code is overtly used to manipulate private sector behavior for political purposes.
So will the tax breaks for real estate go away?
Probably not completely. But some of the best bonus depreciation breaks are already slated to expire soon … unless they’re extended to create more stimulus.
We’re not waiting around. There’s a window of opportunity for real estate investors … so we think the smart move is to grab them while you can.
Until next time … good investing!