On a recent episode of the Commercial Connection Podcast, our host, Spencer Taylor, and Dave Brown, CEO of IPE 1031 and Co-Chair of the Government Affairs Committee of the Federation of Exchange Accommodators, discussed the enormous impact that 1031 exchanges are having on our economy.
1. Numerous jobs per year are supported by 1031 exchange activity
Dave Brown shared this interesting statistic, “On a yearly basis, the total jobs supported by like-kind exchange rules total 568,000. Studies suggest that might be underreported because they believe that exchange activity is likely underestimated by the treasury, so it could be in excess of 700,000 jobs per year that are supported by 1031 exchange activity.” This statistic alone is a major reason why 1031 exchanges are so beneficial and impactful to the local and national economy.
2. 1031 exchanges result in more value added to GDP
Dave went on to mention that, “1031 exchangers invest a third more cash into improving replacement properties than non-1031 exchangers, which drives construction growth, construction jobs, and suppliers. The equity that stays in the system is supporting and creating more jobs and more value added to GDP.” So 1031 exchanges are not only supporting and creating jobs, but they are also promoting growth and adding value to GDP—which expands the overall size of the economy and strengthens fiscal conditions.
3. More 1031 exchanges translates to more tax revenue
“1031 exchange transactions, through transfer, state and local taxes that get paid as a result of the extra transactional activity over ten years is $80 billion, and the cost to treasury is just shy of $20 billion.” The benefits of 1031 exchanges to local municipalities and state governments are clear—more exchanges translates into more tax revenue.
4. They are integral to every facet of the economy — and are not just for the rich
Many advocates for this new proposed tax reform suggest that 1031 exchanges are for the wealthy; they associate like-kind exchanges with greed, hoarding wealth, and tax evasion. Dave stated, “There is a perception that 1031 exchanges are for the wealthy—they are 100% not. Our transactions are for farmers, investors, and everyday folks.” 1031 exchanges are not exclusive to the rich. A 1031 exchange is to real estate as a 401k/Roth IRA is to stocks. In both vehicles, you make an initial investment with taxed dollars. You are then able to trade stocks without paying tax on gains; you
can sell the stock, take the income, and then pay tax. The same is true with 1031 exchanges: it allows you to trade real estate without paying tax on gains, and you then sell the property, take the income, and pay tax. There is truly no difference between the two. “It [1031 exchanges] is integral to all facets of the economy. Ad, office, commercial, conservation… and it’s one of the most underappreciated and most impactful things.”
Join us in our lobbying efforts supporting the retention of 1031 exchanges and visit 1031buildsamerica.org. Click “Take Action” to urge members of congress to preserve section 1031.
Contact us if you are in need of a replacement property for your 1031 exchange or if you are interested in a safe, secure, and stable commercial real estate investment opportunity. millcreekcommercial.com