WASHINGTON -- Donald Trump told a congressional panel the solution to America's economic woes is for investors like him to be able to get more tax breaks.
Specifically, in Thursday testimony, Trump blasted the 1986 tax reform law that took away tax shelters for investors in exchange for a lower tax rate for the highest earners.
'This tax act was an absolute catastrophe for the country, for the real estate industry,' said Trump, one of New York's most famous real estate developers whose $4 billion empire is collapsing under a sea of debt.
'People don't have the incentive anymore to invest,' said Trump.
The 1986 tax law ended a 10 percent deduction for tax investments, eliminated various tax shelters, and reduced the tax treatment for profits from the sale of real estate, stocks and bonds. A significant consequence was that investors could no longer deduct losses from their investments unless they were actively involved in the projects.
In exchange, the 1986 law cut the maximum tax rate on top earners to 33 percent from 50 percent, and since then, it has been lowered to 31 percent.
But now, Trump said, the United States is 'no different from the Soviet Union. They have no incentive to invest, and we have no incentive to invest.'
'If something isn't quickly done to put the incentive back, this country is going to be in deep trouble,' he said.
Many real estate experts and economists have blamed Trump for his problems -- he has had to sell off vast chunks of his real estate, casino, hotel and airline holdings to avoid personal bankruptcy -- saying he overextended himself by borrowing too heavily and in many cases, paying too much for his properties.
But Trump placed the blame on members of Congresswho voted for the 1986 tax law: 'I bought things that were great deals in the middle '80s ... and suddenly they weren't good deals anymore. They changed the deal on me ... and that's pretty unfair.'
Trump's testimony was accepted virtually without challenge from the House Budget Committee's task force on urgent fiscal issues, which was examining the so-called credit crunch. Developers have accused banks of clamping down on credit for even the most creditworthy of borrowers.
But ironically, it was easy credit for big-name developers like Trump during the early 1980s that has led banks and bank regulators to re- examine their lending practices. Many banks have failed, chiefly because they invested too heavily in real estate, allowing an oversupply of office and commercial buildings.
William Seidman, who recently resigned as chairman of the Federal Deposit Insurance Corp., which regulates banks, told the House committee that banks are right to re-examine their lending policies, and cautioned against pressuring regulators to ease up on banks.
Seidman, however, said he had to agree with some of what Trump said.
He, too, felt the 1986 tax law went too far in revoking tax breaks for so-called passive investors, or people who invested in, but did not manage, projects that lost money.
Trump said the law has made wealthy people hesitant to invest in housing and other real estate projects, and that's hurting the economy.
'I truly feel that this country is in a depression -- it's not (just) a recession -- and one of the reasons we're here is because of what happened in 1986,' Trump told the House panel. 'That's not much of a tribute to the folks running this country.'