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1 Alex Muresianu, 1980s Tax Reform, Cost Recovery, and the Real Estate Industry: Lessons for Today 1 (2020)

handle is hein.taxfoundation/tftxrcr0001 and id is 1 raw text is: 1980s Tax Reform, Cost Recovery, and the Real Estate Industry: Lessons for Today FISCAL Alex Muresianu FACT No. 720 July 2020 Key Findings Allowing companies to fully and immediately deduct investments in structures is one of the most cost-efficient ways lawmakers can stimulate investment, create jobs, and boost GDP during a post-pandemic recovery. Changes to depreciation schedules in the two pieces of major tax legislation in the 1980s influenced investment in real estate and have since been reformed, so accelerating cost recovery for structures would not cause the problems that bedeviled 1980s real estate like overbuilding. The Economic Recovery Tax Act of 1981 accelerated depreciation of commercial and noncommercial real estate, making those investments more attractive. The Tax Reform Act of 1986 extended depreciation schedules for both forms of real estate, reducing the attractiveness of those investments. The real estate market was volatile in the 1980s due to a variety of factors, including but not limited to those tax changes. The tax provisions that helped drive inefficient investment were the deduction for business interest and the passive loss deduction, which created opportunities for tax-motivated investments by how they interacted with cost recovery policy. The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our research, analysis, and experts have informed smarter tax policy at the federal, state, and global levels. We are a 501(c)(3) nonprofit organization. ©2020 Tax Foundation Distributed under Creative Commons CC-BY-NC 4.0 Editor, Rachel Shuster Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 taxfoundation.org

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