Scott Van Voorhis

Maybe “corrupt” is too strong a word for President Donald Trump’s tax plan; maybe not. But the seemingly willy-nilly way it doles out rewards and punishments to various segments of the real estate world is not exactly the best advertisement for either its probity or overall vision.

The freshly-inked tax plan courtesy of the Trump administration slights the world of residential real estate, leaving real estate agents fuming over the scaling back of government support for homeownership.

But it has provided a not entirely unexpected win for a range of players in that other half of the property world, commercial real estate, which has generated much of our president’s personal wealth.

Engineers and architects across Massachusetts were the last real estate industry players to scramble aboard the Trump tax cut wagon, emerging as big winners in the $1.5 trillion GOP tax plan after a flurry of eleventh-hour changes.

Architects and engineers will now get to take advantage of a 20 percent tax deduction, a perk originally restricted to manufacturing firms and other capital intensive firms in the hopes of spurring new investment and jobs. Originally they were excluded, along with other professional service firms, such as doctors, lawyers and financiers. The change was made in the last few days leading up to the vote after a successful, last-minute lobbying blitz by trade groups representing the nation’s architects and engineers.

However, the victory for the A&E sector was offset by pain in the residential real estate industry. Thanks to a lobbying blitz of its own, the National Association of Realtors managed to prevent a full-scale disaster – such as the complete repeal of the mortgage interest deduction. But NAR was unable to prevent the scaling back of the deduction for mortgages above $750,000, as well as damaging provisions that may encourage homeowners to stay put at a time when prices are soaring amid a chronic, years-long shortage of listings.

More Winners In CRE

Engineers and architects weren’t the only commercial real estate players celebrating their good fortune. Real estate investors also make out quite well under the GOP tax bill, with the ability to slash their taxable income by a fifth with the 20 percent pass-through tax deduction. It was another provision added to the sprawling tax bill as it headed the finish line.

The GOP’s Congressional leadership had pitched 20 percent tax deduction as a way to provide some relief to entrepreneurs and other firms creating new jobs. These privately held firms often operate as LLPs, sole proprietorships and S-corps, with income passed through to the tax returns of their owners.

As a result, many startups and other small businesses cuts are taxed at the higher, individual tax rate – set to drop from 39.6 percent down to 37 percent – as opposed to the lower tax rate paid by companies, set to fall to 21 percent under the new tax bill.

But in a last-minute adjustment, top Republicans in Congress decided to pass that 20 percent deduction along to real estate investors and owners, providing a potentially sizable payback to Trump, whose real estate businesses are organized as pass-throughs, as well as Sen. Bob Corker, the Tennessee Republican with a real estate fortune of his own.

A bevy of Boston area developers and real estate investors set to benefit from the same break.

Also getting a huge handout are real estate investment trusts like Boston Properties, owner of the Prudential tower and one of the nation’s top real estate and development firms. REIT shareholders will see their tax rate plunge to 29.6 percent from nearly 40 percent.

So what’s the logic behind the decision by Trump and the GOP to shift tax incentives to commercial real estate as the expense of the residential sector?

Maybe there’s some fuzzy ideology driving this move. The GOP has pitched its plan as a way of boosting job creation. In making their successful pitch to be included in the circle of favored businesses eligible for the 20 percent tax deduction, the American Institute of Architects pitched themselves as “major job creators of the American economy.”

But if it’s all about job creation, then why extend this coveted perk to rich real estate developers and investors who often don’t have very big payrolls?

Whatever principles that guided the initial drafting of the Trump tax bill appear to have been discarded by the time it reached the president’s desk. Rather, the so-called “Tax Cuts and Jobs Act” looks more like a giant, messy free-for-all where the best lobbyists grabbed the most loot.

Happy New Year!