Thursday, January 25, 2018

A First Look at the Tax Cut and Jobs Act, the Economy, and Real Estate

UPDATE May 2018

In May 2018 David Barker and Steve Malpezzi presented abridged and revised versions of our preliminary analysis of the Tax Cut and Jobs Act to the professional side of the Homer Hoyt Fellows.

Malpezzi presented contextual data on government taxation, spending, deficits, debt, etc., and on possible macroeconomic effects of the TC&JA.  Download Malpezzi's presentation here.

Barker presented detailed discussion of the TC&JA's potential effects on real estate markets, including several case studies.  Download Barker's presentation here.

Those presentations were developed from a larger effort that involved several other colleagues that began in January.  That effort, and the larger library of draft presentation slides, are presented below.

The slides above are cleaner and more concise; however they are still preliminary and not meant as tax or investment advice.

The slides below are less polished (!) and more extensive; they may be of interest to instructors who are searching for selected slides for class use.  Or for those who are gluttons for PowerPoint punishment.

Original January post and files follow here:

In January 2018, we held a meeting of the Homer Hoyt Academic Fellows in West Palm Beach, Florida.  Much more about the Hoyt Group another day, soon.  For now suffice it to say that the meeting gathers about 50 real estate researchers, mainly but not entirely economists, for several days of papers and presentations.

One of the sessions was devoted to a semi-structured group discussion of the Tax Cut and Jobs Act 2017, including but not limited to provisions affecting real estate.

To help frame the discussion, we prepared some draft materials, and pointed colleagues to a few other sources. This blog post provides links to files containing that information, so that meeting participants – and now, other readers of this blog – can readily access these materials.

Taxes are complicated things, as I re-discovered recently when my tax software choked on my own return for the year I split between Wisconsin and Massachusetts. I finished my returns “by hand” and submit them by paper mail. Wish me luck!

Which reminds me that it's a good place to place a disclaimer.  These notes are working drafts, written by economists who are not tax advisors.  As you will see, there are several areas where the TC&JA is not very clear, and these materials should not be used as substitutes for professional advice.

The draft materials will be revised.  Comments and corrections are extremely welcome, especially at this early stage.  The current version is dated April 30, 2018.

For the moment this post points you to two links.

The first link downloads a PDF summary of tax provisions, comparing the gist of major provisions before and after the Tax Cut and Jobs Act. Again we reiterate that these are brief summaries and not a substitute for professional tax advice.

The second link downloads a PowerPoint presentation that includes slides we used in the discussion, including the summary table of major provisions noted above, but also a number of other slides, about 100 in total. Quite a few of the slides are culled from my class notes on public finance, others were contributed by Homer Hoyt participants including David BarkerRichard Green and Morris Davis. Since I pulled together the final deck, with a lot of my own slides, David Richard and Morris should not be held responsible for any of my outrageous personal opinions remaining.

They are grouped within the deck roughly as follows:

  1. Taxes – some basics.
  2. Spending – some basics.
  3. Deficits and debt – some basics.
  4. What about state and local taxes?
  5. Review of the Tax Cut and Jobs Act 2017; comparison to prior code.
  6. TC&JA and real estate – focus on pass-through entities.
  7. TC&JA: who gets the cuts?
  8. TC&JA:  will it increase investment?
  9. TC&JA:  will it increase GDP, wages and incomes?
  10. Some readings.

Be aware that most of the slides also have notes attached, some of them fairly extensive. A preliminary bibliography is included as a long note to a slide near the end. Look for the "Tax Library in Hell" slide.  The bibliography is on the next slide.

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