Trump: The Art of the Tax Deal
See this video on YouTube: https://www.youtube.com/watch?v=5OUsTT9XN1Q
Donald Trump is famous for making high-profile deals using other people’s money. Sometimes those other people are not his business partners or lenders but rather the taxpayers. For a figure who is seen to epitomize unfettered entrepreneurship, he has been relentless in his pursuit of government financial assistance.
Trump’s first major project, the transformation of the
old Commodore Hotel next to New York’s Grand Central Station into a new
1,400-room Grand Hyatt, established the pattern. Trump arranged to purchase the
property from the bankrupt Penn Central railroad and sell it for $1 to the New
York State Urban Development Corporation, which agreed to award Trump a 99-year
lease under which he would make gradually escalating payments in lieu of
property taxes.
The resulting $4 million per year tax abatement was criticized as excessive but was approved by the Board of Estimate in 1976. The
deal also provided for profit sharing with the city. The total value of the
abatement has been estimated from $45 million (Wall
Street Journal, January 14, 1982) to $56 million.
In 1981 the New York Department of Housing Preservation and Development denied Trump’s request for a ten-year property tax abatement worth up $20 million on his project that replaced the old Bonwit Teller department store building with the glitzy Trump Tower. The decision came amid an effort by the city to rein in its abatement program, especially with regard to luxury projects.
Trump, who in order to
qualify had to argue that the property was underutilized as of 1971, filed suit
and got a state judge to overrule the city and allow the abatement.
A state appeals court reversed that decision, pointing out that in
1971 the Bonwit Teller store on the site had gross sales exceeding $30 million
and thus was not underutilized. Trump did not give up. He appealed to the
state’s highest court, which in 1982 ordered the city to reconsider the
application.
When the city turned him down again, Trump went back to
court and got a judge to order the city to grant the abatement.
Trump sought extensive tax breaks for his planned Television
City mega-development on the Upper West Side of Manhattan that was designed to
provide a new home for the NBC network, but in 1987 the city rejected the request.
Mayor Ed Koch said: “Common sense does not allow me to give
away the city’s Treasury to Donald Trump.” NBC decided to remain in Rockefeller
Center.
Trump kept pushing for subsidies, and in 1993 he began
withholding his tax payments to pressure officials to comply with his demands
for tax breaks and state-backed financing.
“I’ve always informed everyone that
until such time that we get zoning and the economic development package
together, to pay real-estate taxes would be foolish,” Trump told a New
York Times reporter.
A day later he said he had changed his
mind and would pay the $4.4 million in back taxes he owed.
Trump later sought assistance for the project, renamed
Riverside South, from the U.S. Department of Housing and Urban Development in
the form of federal mortgage insurance, but he was rebuffed.
After Trump took over Washington’s Old Post Office Pavilion
in 2012 to turn it into a luxury hotel, his company asked the DC government to
forgo property taxes but it refused.
When Trump does not receive tax breaks he sometimes creates
do-it-yourself subsidies by challenging the assessed value of his real estate
holdings in order to lower his property tax bill.
He has used this practice,
which is employed by many other large corporations and property owners, in
places such as Palm Beach.
Trumped bragged that he got a great deal when he
bought the 118-room Mar-a-Lago mansion in 1986 for $10 million (but only
$2,812 of his own money, according to a June 22, 1989 article in the Miami Herald), implying it was worth much
more.
But when Palm Beach County assessed the property at $11.5 million, Trump
appealed, seeking an $81,000 reduction in his taxes. A judge ruled against him
(UPI, September 28, 1989). Trump later challenged an increased assessment and
got a $118,000 reduction for one year but not for the next (Palm Beach Post, December 9, 1992).
In 1990 Trump won an assessment fight with New York City
concerning his then-undeveloped waterfront property on the Upper West Side. He
gained a $1.2 million savings in his 1989 taxes (Newsday,
July 6, 1990).
More recently, Trump has been seeking a 90 percent reduction in property
taxes on his Trump National Golf Club in Westchester County, New York. Trump listed the club as having a value of more
than $50 million in the financial disclosure document he released as part of his
presidential bid, yet his assessment appeal claims it is worth only $1.4
million.
It’s not hard to guess which figure is used when Trump wants
to justify his claim of being worth $10 billion.