Real estate organizations are mobilizing against a proposed Congressional measure that could significantly limit property tax deductions for businesses. Industry leaders warn that such a change would have serious economic consequences, including higher costs, reduced property values, and potential instability in both the real estate market and the broader economy.

What’s Happening?

The Real Estate Roundtable, along with 16 other industry groups, is pushing back against the proposal, arguing that property taxes are a fixed business expense—unlike income taxes, which can vary based on earnings. They warn that restricting the deduction could increase tax liabilities by 40%, leading to financial distress, job losses, and even business insolvencies.

Why It Matters

Property taxes account for nearly 40% of commercial real estate operating costs. Removing or limiting the deduction would not only inflate taxable income but could also drive effective tax rates back to levels not seen since the 1970s.

Impact on Property Values and Investment

A cap on property tax deductions would have a direct impact on commercial property values, potentially destabilizing banks and discouraging further investment in the sector. Additionally:

• Higher costs would be passed on to tenants, increasing rents across the board—especially for lower-income housing.

• Affordable development projects could slow down, making it even harder to address housing shortages.

• Overall economic growth could take a hit, with U.S. businesses already paying nearly $400 billion annually in property taxes.

A Broader Tax Debate

This proposal comes as the carried interest tax deduction—another longstanding tax break—faces renewed scrutiny. Private equity and venture capital firms are fighting to preserve it, arguing that it encourages investment and job creation. Critics, however, see it as a tax loophole that primarily benefits high-income investors.

What’s Next?

Real estate organizations are urging lawmakers to reject changes to property tax deductions, warning of widespread economic disruption. They are calling on industry professionals to speak out and actively oppose the proposal before it gains traction in Congress.

The Bottom Line

If this measure moves forward, the real estate industry could face higher tax burdens, declining property values, and increased pressure on businesses and tenants alike. Now is the time for industry stakeholders to push back and make their voices heard.