You might have noticed that Donald Trump just promised that if elected, he will “get SALT back.”
In his pledge on Truth Social, he neglected to mention which president capped the federal tax deduction for state and local taxes in the first place. That would be Trump himself, in 2017.
To be sure, the massive tax bill Trump eagerly signed that December was conceived and crafted by congressional Republicans, who designed it to favor red states over blue ones. It is highly unlikely that Trump read the bill, although he was surely briefed on its contents as it made its way through Congress.
When Senate Majority Leader Charles Schumer later complained about the change in a 2018 meeting with Trump, the president acted as if he didn’t realize SALT deductions had been capped at $10,000. It’s quite possible that Trump was telling the truth, although signing a bill without knowing it included such a major component might be worse than lying.
In any case, Trump told Schumer at that meeting that he’d look into it. If he followed through on that, it was a well-kept secret. The change stuck. Republican House and Senate leaders had no interest in rolling it back, despite some pressure from Republican House members in the areas hardest hit by the capping of SALT deductions, such as Long Island.
Not coincidentally, Trump’s new pledge to reverse the bill came in a message urging people to come to his Long Island rally Wednesday.
The next president could get rid of the SALT reform by doing nothing: It is due to expire at the end of next year.
SALT deductions were especially valuable in New York, California and 10 other blue states where property or local income taxes are high. In New York, these taxes, combined, run well into five figures and sometimes six. Subtracting them from federal taxable income was such a big benefit that the real estate industry protested vigorously that it would devalue homes.
It did disrupt the market, but only briefly. For high earners, the impact of the change was less than expected because the alternative minimum tax had been denying them big deductions anyway.
Many New Yorkers had to swallow the tax hike. It’s possible that it helped persuade some to move to low-tax states. Low earners were not affected or, because of other provisions in the bill, enjoyed a tax cut.
Regardless, when Covid arrived and mortgage rates hit a historic low, the housing market went crazy and the industry largely forgot about SALT. But now it’s back, because the election has given its critics leverage. Trump’s promise is a result of that.
A quick rollback is a longshot because it’s easier for Congress and the next president to just let it expire. As president, Trump didn’t push many of his own initiatives through Congress. Whether SALT is reformed before it lapses depends more on who controls the House and Senate next year.
What we’re thinking about: Who is suffering the most pain when loans on devalued office buildings come due: owners or lenders? Consider the heavily discounted sale of Savanna’s 360 Lexington Avenue and SL Green’s purchase of the senior debt on Aby Rosen’s 522 Fifth Avenue at 60 percent of par. Email your take on the situation to eengquist@therealdeal.com.
A thing we’ve learned: After construction began on Empire State Building, the plans were hastily revised to ensure it would be taller than the Chrysler Building, whose developer (Walter Chrysler) shocked the city by hoisting a secretly constructed spire to the top of his in-progress tower. The “Clash of the Skyscrapers” is told in fascinating detail in Tim Harford’s 40-minute podcast Cautionary Tales.
Elsewhere…
— In its first City Council appearance, the New York Apartment Association testified that public assistance for renters should not be modeled after the Emergency Rental Assistance Program, a Covid initiative that ran out of money and served as an eviction shield for renters.
But the landlord group’s submitted testimony did not mention tenants’ exploitation of the initiative. Instead it focused on ERAP’s negative impact on renters and building maintenance, rather than on owners’ finances. The organization knows which two of those three things New York Democrats care about most, and has crafted its public-facing strategy accordingly.
— An attorney for Ian Bruce Eichner’s Crown Heights project submitted an analysis to the City Planning Commission showing that the rezoning Eichner seeks would provide the Brooklyn Botanic Garden more protection from shadows than it has from the site’s current zoning, which dates back to 1961. Yet the Garden continues to oppose the plan.
“The great part about science is that you don’t have to agree with it for it to be true,” said Eichner’s lawyer, David Rosenberg of Rosenberg and Estis. “One has to wonder what BBG’s motivation is here. We’ve worked very hard to bring the Garden into this process and help us address their concerns. They wanted no part of it.”
The plan for 962-972 Franklin Avenue calls for 475 apartments, 119 of them permanently income-restricted. Absent a rezoning, a market-rate condo could be built. Council member Crystal Hudson will decide its fate.
Closing time
Residential: The priciest residential sale Wednesday was $24.37 million for a 5,741-square-foot condominium unit at 500 West 18th Street in Chelsea. Deborah Kern and Steve Gold of The Corcoran Group had the listing.
Commercial: The largest commercial sale of the day was for $160 million for a 1.1 million-square-foot office building at 80 Pine Street, also known as 110 Maiden Lane, in the Financial District. Rudin Management sold the property to Bushburg.
New to the Market: The highest price for a residential property hitting the market was $40 million for a 3,746-square-foot condominium unit at 730 Fifth Avenue in Midtown. Connor Cuccinelli and Noble Black of Douglas Elliman have the listing.
Breaking Ground: The largest new building application filed was for a 376,346-square-foot, 27-story, 90-unit residential building at 104-106 Fleet Street, 165 Willoughby Street, and 287 Flatbush Avenue Extension. JFA Architects & Engineers filed the permits.
— Matthew Elo