Property tax is the workable wealth tax. There's no such thing as a perfect policy, but in the context of NYC this seems worth trying. I'll be interested to see if it helps create some liquidity in the housing market (the goal), or if it only functions as revenue source.
One wrinkle I haven't heard much discussion of -- cities respond to incentives too. NYC is a global destination for the mega wealthy. If it turns out the uber-rich don't mind paying and this becomes a cash cow for the city, that creates incentives for the city to cater to them and try and get more uber-rich people to have second homes in the city.
> If it turns out the uber-rich don't mind paying and this becomes a cash cow for the city, that creates incentives for the city to cater to them and try and get more uber-rich people to have second homes in the city.
The tax is reasonably small enough that I wouldn't expect a lot of wealthy people from divesting from their properties, but it's probably going to make them think twice about buying new properties.
That second-order effect is the important balancing act for any locality-based wealth tax. If you make the tax too high it starts discouraging the behavior you're taxing, which can paradoxically reduce overall tax revenue.
France discovered this the hard way when they implemented their first wealth tax: Many ultra-wealthy people moved their capital out of France to avoid the tax, which was suspected to have had an overall decreasing effect on tax revenue from that demographic. They replaced the wealth tax with a property tax, which probably played a large role in inspiring this pied-à-terre policy.
"If you make the tax too high it starts discouraging the behavior you're taxing, which can paradoxically reduce overall tax revenue."
I am generally against more taxes, but the structure of this one is quite good in terms of the incentives. If wealthy people who only live in the city part-time stay in hotels instead of buying second homes, the net effect should be to increase the cost of hotel rooms and reduce the cost of owned-housing. NYC charges nearly 10% tax on hotel stays, so recoups some of the cost there. Having property in your city mostly being occupied by people who live their full time, particularly when property is already very expensive, seems like a good thing overall.
> increase the cost of hotel rooms and reduce the cost of owned-housing
Reducing the cost of $5M+ homes will slightly help some wealthy people who live in NYC, and there will be a modest trickle-down effect into less expensive properties. But I thought the goal was to generate tax revenue from the taxes, which wouldn't happen to the extent they end up in the hands of NYC residents.
I'm not sure why if you or I were to expatriate and let go of our US citizenship, we'd still be on the hook for taxes for (iirc) 15 years, but the ultra wealthy can get away with tax havens while remaining citizenship and reaping the benefits of protection by X state.
What prevents the tax following the offshoring attempts? Is it simply that the IRS doesn't have the manpower? or is there a legal loophole for avoiding paying your share that only works for the ultra wealthy?
> we'd still be on the hook for taxes for (iirc) 15 years
This is defintely not true. I did some light Google searches and I cannot anything. There is an exit tax, but only applies if your net worth exceeds 2million USD.
Turns out it's an old law, if you expatriated between 2004 and 2008, and spent 30+ days in the US within 10 years of expatriation.
> Further, expatriated individuals will be subject to U.S. tax on their worldwide income for any of the 10 years following expatriation in which they are present in the U.S. for more than 30 days, or 60 days in the case of individuals working in the U.S. for an unrelated employer.
I think its a good idea in general to tax the second property for any country where housing is a struggle. Its usage based taxation so fair in some sense. Housing is somewhat of a critical asset for a normal safe life. Commercialization of housing properties creates a circular effect on the pricing, thereby increasing the cost of almost everything else.
The goal of this isn't simply to raise revenue, it's also to discourage parking money in empty properties when it's one of the most expensive cities to live in and doesn't have enough housing
"While the tax seems large, experts say the city's antiquated assessment and valuation system dramatically undervalues properties, reducing the burden. City valuations can often be 10% or less of the true market value, they said.
Rather than overhaul the system immediately, the city will gradually update valuations – and the tax – according to the budget documents. Starting in the 2028-2029 tax year, the property values will be based on comparable sales. Since valuations will skyrocket, the tax rates will fall to compensate."
Are there good sources on income tax discouraging working? My rudimentary google searches are mixed, between it being a disincentive, and forcing people to work more for the same income.
>Land value taxes don't discourage desirable behavior
Are you serious? LVTs expressly incentivizes landlords to kick out "grandfathered in" developments and uses in favor of redevelopment and sale for that purpose.
But those grandfathered in developments and uses are exactly what made the place valuable in the first place and you need some amount of them to remain.
Redevelopment often mitigates housing scarcity in general, including for existing residents. They may have to move to a slightly smaller apartment within a generally much improved area, which usually leaves them better off. This is especially true for LVT, which amounts to a decrease in property tax for the improvements to land.
The fairest and easiest to realize wealth tax is on inheritance. It is great to want to give your kids a headstart in the world, it is terrible for them and the people around them to set them up for life.
> It is great to want to give your kids a head start in the world, it is terrible for them and the people around them to set them up for life.
How is it terrible for my kids to not have to break their back like I did to build the wealth I'm looking to pass on to them after I die? Why should they go through the same struggles that I did? It is up to them to squander it or transform it into even more wealth to pass it down to their children and so on. Ideally the former, but sometimes what parents dream for their children does not always come to pass.
It's really not the easiest. You have to prevent gifting things at a lower tax rate while alive. That means it comes bundled with income tax or gift tax implications.
Fairest? I mean, land value tax is fair. So are Pigouvian taxes. In fact they're arguable more than fair. Not having these taxes is arguably unfair. Who deserves ownership of natural resources or to inflict negative externalities on others?
Taking things someone earned through labour and not letting them give it to who they want isn't very fair.
As a point on terminology: That's not a really a wealth tax on the accumulated assets at-rest own by the (now eternally-resting) owner, but an income tax on the wealth as it moves to the recipients who didn't have it and are getting a massive gift.
It just happens to be a kind of gift/transfer we've decided because of tradition to consider as a special case, where (A) it happens right after a given dies and (B) the giver is frequently but not necessarily related to the recipient.
The problems with inheritance tax is that they can be avoided through trust structures and insurance schemes. In theory it's a good tax, but in practice many wealthy people figured out how not to pay it.
Those schemes are also human-created though, and can be human-fixed. I've never really understood the arguments that go like: "This regulation won't work because the people it targets will avoid it through loopholes and other schemes." Well, get rid of the loopholes and schemes, then!
Granted, this requires lawmakers to explore more of the "exploit space" around their proposed regulations, but I don't think that's really asking a lot of them.
Just curious what you think the correct solution is? You're rich, you have a kid, you die when the kid is 2yrs old. So they get nothing? 12? 22? 32?. Is there some "correct" number? If you're raising them in some $100m home do they get booted out and put in a tenement?
On the other hand, most people die closer to 75-80 and their kids are 50+. Leaving inheritance to them isn't really spoiling them as they are alread adults with established lives.
In the US, the inheritance taxes don't kick in until $15M ($30M for married couples). Even at 2 years old, a child can inherit more money than most people will make in their lifetime before a dime is paid to the IRS.
Estate taxes kick in at much lower threshold in most States. Washington had to repeal their recently created 35% estate tax (for a combined 75% rate) due to overt capital flight to places like Idaho. The exemption in Washington is $3M.
I don't care about estate and inheritance taxes much but many people do and it empirically drives behavior.
I would disagree, I think income taxes and inheritance taxes are morally wrong. Earning money to support oneself and family instead of relying on public largesse should not be taxed. Passing the fruits of a lifetime of work to ones heirs so they can continue do productive work instead of relying on public largesse should not be taxed.
Yes.. spend enough time amongst the inheritocracy and you'll see the wealth is as often as not wasted on them.
There's just too much fun to be had with 0.1% wealth that you didn't have to sacrifice your 20s, 30s (and maybe 40s) to build. Coast at some job with a top 25-50% income and 0.1% inheritance in NYC and live the life.
So if you're spending your inheritance living the high life, that economic activity benefits a lot of other people. Still a net positive in my view.
I get the political power concern, and money = power at a certain point. But I'd rather work on getting money out of politics than putting limits on what people can decide will happen to their assets after they die.
The problem is that theres a lot of stuff in the tax code that allows those at the higher end to also defer taxes indefinitely. So not taxing estates/inheritance, and allowing these deferrals leaves assets untaxed at the high end forever.
For example, step up basis allows inherited assets to have their cost basis re-struck at the value at time of inheritance. So if there is no inheritance tax, the assets transfer to a new owner and a large chunk of value is forever untaxed, even when/if they eventually sell.
Similarly all sorts of interesting stuff that can be done with trusts. Again stuff that's only accessible / worth the hassle to 1%.
In a world with extreme outcomes due to scaling, we might accidentally be re-inventing the hereditary aristocracy if the assets can accumulate outside the tax system.
I'm curious how you envision money ever leaving politics. I hear this phrase often and every time I do it feels more and more nonsensical. Politics is what we call the social aspect of resource management (it's often called "political economy" for this reason). The only way I can see to remove money from politics is to create a society that has no money at all. I assume that isn't what you mean?
Right it seems like one of those libertarian perfect-world talking points that ignores the impossibility of implementation.
There's so many indirect ways of influencing politics given lots of money - alternative media, buying out local news, controlling national news.. making entertainment media of your own ideology. Fund interesting groups around particular topics. Give poor Ivy League grads a job and groom them for higher office.. oh wait.
Consumption tax is sales/VAT tax excluding some necessities and capital goods. Yes, there are some awkward edge cases: in the UK the exclusions were food and children's clothes, which leads to battles over prepared cold food (e.g. sandwich), takeaway and restaurant dining.
Sin taxes are obviously things society might want to discourage, mainly for health reasons, like alcohol and smoking, but also gambling and externalities, like pollution. Some might stretch that to all carbon emissions to moderate climate change.
Don't tax things you want: working / income and investment / capital gains.
Inheritance tax is doubly wrong because the wealth is already taxed, and death is unavoidable (but emigration is possible, which might help in some countries).
Property taxes on real property or possibly land value tax (it's a limited resource, at least in places where people want to live, and requires a lot of public infrastructure to support its value there).
Tariffs, various usage taxes and fees.
Need a mechanism to address the regressiveness of some of this but that's an implementation detail.
Their take on inheritance taxes is insane, but I tend to agree that income taxes are immoral. Corporations get taxed on profits: If OkayPhysicist, Inc. spends $200 to make $300, it would be taxed some fraction of $100. Individuals, on the other hand, get taxed on revenue. It doesn't matter if it costs me $4000 in rent, groceries, transportation, etc., to make $6000, I'm getting taxed on that full $6000.
Capital gains taxes, on the other hand, are completely moral, and should be much, much higher. Capital investment benefits enormously from the State protecting their property "rights" (you don't need to hire a private army to prevent the workers from just deciding to run your factory for their own benefit, that's what the cops are for), and at a minimum the state would be justified in collecting that dividend for itself. Bootlickers and profession bootlickers (i.e., economists) would complain that a high capital gains tax disincentives investment, but as long as the value of investment is positive, that is, outpacing inflation, it makes zero sense to let your money languish in a Scrooge McDuck pile rather than get some value out of it.
>It doesn't matter if it costs me $4000 in rent, groceries, transportation, etc., to make $6000, I'm getting taxed on that full $6000.
So if I spend $5000 on groceries because I'm eating wagyu steak and lobster everyday, is that a fair "expense" too? You might retort that's obviously a luxury and there should be some baseline that's tax free, but then you're just describing the standard deduction.
>but as long as the value of investment is positive, that is, outpacing inflation, it makes zero sense to let your money languish in a Scrooge McDuck pile rather than get some value out of it.
And I think that inheritance, while a natural desire, is morally wrong. It's an example that desires aren't always congruent with morality. People will go to great lengths to justify their conclusion.
Are gifts morally wrong? If I'm near death is it wrong for to give my assets to my children beforehand, or does it only become immoral if done via a will?
Or look at monarchies and titles of nobility. In the past direct inheritance of political assets was common, and acting on that natural desire, the people involve claimed that parents deserved to direct what they (and their ancestors) had accumulated on to the next generation of their own family.
Yet nowadays most countries and people have decided it is immoral, and they also took steps to make common forms of it extremely illegal.
My point is that economic inheritance today is just as much a social-construct as political inheritance was then. It exists because we permit it to exist, don't be fooled by anyone claiming it's an intrinsic law of the universe or a divine mandate by god that must be obeyed.
First one makes sense, second one I’m quizzical about.
Inheritance taxes tend to only kick in at the 8+ digit range.
If anything, taxing that should encourage descendents to do productive work, eh? Since not taxing it, but taxing other things actually discourages it?
I can’t imagine how it would result in anyone relying on public largesse either unless they are really terrible with money. In which case a few extra zeros is unlikely to help any?
I suppose like with many things it's a question of scale. A little is good, more is better, but at some point it may start to have negative consequences.
When I was little and playing SimCity 2000 I looked at the tax rates for the city and noticed that the sales tax rate was like 2%, and based on our 14% VAT at the time, it seemed super low to me so I upped it to 12% and was surprised at how unhappy the citizens were.
This gave me the impression that Americans wouldn’t be happy with a significant sales tax, or perhaps this was a city sales tax on an existing state sales tax, which yes, would be outrageous, or maybe Americans get taxed in some other way which makes up for our VAT.
Anyway, I look back and chuckle at my own lack of knowledge at the time.
I would love a VAT tax instead of the never ending stream of taxes we pay on everything else.
Americans are stupid. They see a higher tax on an iPhone they don't need, they will cry about it.
But they pay more at the end of the year on income tax, property tax, car registration, etc., they could care less.
Most Americans don't even look at their pay stub, and are more than happy to overpay their income taxes every paycheck so they get a bigger tax return at the end of the year.
They don't realize that money was theirs to begin with.
They complain about not being able to become wealthy while they give the government an interest free loan, when they could be investing that money and earning on it.
Yup, very "Georgist", which I'm a huge fan of. You can move your money to another country, or hide it entirely in stocks that you borrow against until you die. But, you gotta live somewhere. Land is the only thing the state really has, and it's limited; it's the best thing to tax.
> helps create some liquidity in the housing market (the goal)
Is that the stated goal? I thought the goal was to generate revenue from the tax. It's true that triggering sales will create a one-time boost in sales-related taxes, but that's just temporary.
In San Diego we're voting on a new property tax that only applies to nonprimary residences.
The landed gentry want you to believe that they can't be touched unless you're willing to kick your grandmother to the street, but we can absolutely write taxes that apply more narrowly, and sensible tax policy leads to better outcomes and fewer market distortions than hamfisted regulation.
Who benefits most of a city being improved by tax dollar spending? Property owners. They benefit in the range of hundreds of thousands of dollars to millions of dollars each. Thus it makes sense they contribute the most tax dollars.
Or show me a worker who benefits the same amount of money from the city being improved.
This also closes some loopholes/arbitrages around declaration of primary residence for purposes of NYC income tax. There are C-suite execs who declare residence in CT/NJ while spending < 180 nights/year in NYC in their huge apartment, allowing them to avoid NYC income tax.
Anyway, NYC real estate taxes are a mess and in some cases regressive.
For example, taxes are based on values set by the city which for the ultra high end, the are understated by an ORDER OF MAGNITUDE..
See:
> Griffin purchased his 24,000-square-foot penthouse at 220 Central Park South in 2019 for $238 million. ..t he city values the apartment at just $15.5 million .. property tax bill for the 2026-2027 tax year is $858,332
.. Griffin’s property tax bill would more than double to $1.87 million .. in the 2028-2029 tax year, it would increase to just under $4 million
I don't feel terribly about someone paying $4M on property probably worth close to $400M at the moment. Normal high income NYers already pay $10-20k/year on properties worth $1.5M by comparison.
Another regressive aspect there was a proposal to change was a purchase tax for cash purchases. Currently one of the closing costs in NYC/NYS is a mortgage recording tax of nearly 2% of mortgage amount. This means if you are rich enough to buy in cash, you can avoid this tax. And if you are a rich cash buyer you are probably buying a higher end property so.. doubly regressive in a sense.
> I'll be interested to see if it helps create some liquidity in the housing market
lol. why would it? if you tax something, you get less of it.
there is not even close to any kind of shortage of demand for housing in NYC. there is an enormous shortage of supply; it is in fact _illegal_ in most places to build more supply.
The tax is only on non-primary residences - one person owning multiple homes. I don't expect it to have a significant effect on housing supply, but I think it logically could.
No, a tax will always reduce demand \saying otherwise basically ignores decades of established economics.
> that creates incentives for the city to cater to them
What does that even mean? If catering to the wealthy was profitable, everyone would do it. Just look at Dubai, it's built entirely around that model, and it's a brutally competitive space. NYC attracts the mega-wealthy for a different reason: network effects. Meta-wealthy come to be around other mega-wealthy people.
What do you mean? It's not a tax on commercial property.
One effect might be that wealthy non-residents prefer to stay in a hotel when they visit New York? The amount of money being collected as property tax would pay for a very fancy suite.
You sound like you feel the need to criticize this tax because you want to reflexively attack any idea whereby the rich have to pay their fair share of anything, and thus have strung together a bunch of tokens that seem relevant to you, but actually don't constitute a logical response at all to the issue being discussed.
I think this is sarcasm, but in case it's not isn't this the opposite of trickle down? Trickle down means lower taxes for the wealthy so they'll then have access to those extra funds to create jobs (through direct and indirect actions (investing in their companies, buying more stuff, etc.)). This is actually taking money away from the wealthy.
If this works (meaning NYC gets the revenue without kneecapping those extra property taxes in the long run because the wealthy bail on their second homes, which would drive down prices and therefore property taxes), it would be an anti-trickle-down win.
It's a label for a very real tax policy and the advertised reason behind it, it's definitely a thing (or was, at least, the argument is less common today)
To what degree do they really invest it? A lot of rich people just buy shares (other than at an IPO) and just move money around each other's pockets rather than investing in something wealth creating, or just swap already-existing overpriced properties around each other.
> move money around each other's pockets rather than investing in something wealth creating
So your claim is that wealthy people aren't interested in generating more wealth for themselves? What exactly is it you are claiming? Sounds like something a populist youtuber would say.
But that's only because there are other people who will happily move money into your control to get that share from you. Doesn't change the fact that the money you spent acquiring it has moved out of your control onward in the economy.
The share is under your control, the money isn't. Being able to convert it at will doesn't change that. Also how much if anything it's worth when you go to convert it isn't under your control either.
Push up asset prices mainly - so locking poorer people out of (e.g.) home ownership.
Money is not a tangible thing, you can't eat or drink it. Instead it is a signalling protocol for resource allocation. If the very wealthy have many empty homes, when many people are homeless or inadequately housed, then that signalling protocol has failed (from a social justice point of view), and 'trickle down' is not working.
> While the tax seems large, experts say the city’s antiquated assessment and valuation system dramatically undervalues properties, reducing the burden. City valuations can often be 10% or less of the true market value, they said.
I heard about a system for this that struck me as brilliant. Make someone declare the value of their property. Then the government has the choice of taxing them at the scheduled rate, or buying the property from them, for that cost.
TADA.
And if someone wants to artificially inflate the value of their home, to reflect the difficulty of moving out, finding a new secondary residence, etc, then that's their business. No worries. We'll tax that additional value, no problem.
I think this system goes back thousands of years. Why not use it?
It dramatically cuts housing security, and allows local governments to inflate their own property values by doing what is basically eminent domain without the requirement to show need. Make everyone pay taxes, use those to buy up homes, re-list the homes at a higher price. They can effectively price gouge using tax dollars. This could happen to you at literally any point, and that local government doesn't care if the house won't even sell as long as the other houses rise enough in value to cover the lost tax revenue.
I've also heard the same thing but allowing private citizens to buy them, which is almost worse. Anyone sufficiently well off can just wreck someone else's life. If I hate my neighbor and they report the real value of their house, I can force them to sell it to me so they have to move and I can resell it while only losing fees in the process. They would have to over-value their house by an amount that I'm not okay losing, which ends in a sort of auction of escalating values. At the very tippy top, if I'm Warren Buffet's neighbor there's probably not a value I can pay taxes on that would stop him from buying me out if he wanted. Any number that would be a meaningful loss to him is something I can't even pay the taxes on.
It isn't done because it has overt pathological economic characteristics. This forces the owner to write a long-term call option on a non-commodity asset without even collecting the offsetting risk premium expected for such a call option. This puts the asset permanently underwater by construction, which would crater asset values. The maths don't math. You can't just pick one side of a balanced equation and pretend the other side doesn't exist.
At least as important, this scheme is trivially exploitable for corruption and weaponization by government officials in countless ways that don't currently exist. This is not something that anyone should want to enable.
It is a good thing this is the natural context for this terminology then, being the literal domain for which the terminology exists. If someone doesn't understand the fundamental concepts being discussed then why should anyone give credence to their opinion?
Your "gish gallop" and "justifying antisocial behavior" dismissal is almost literally how creationists dismiss discussions of evolution.
> Make someone declare the value of their property. Then the government has the choice of taxing them at the scheduled rate, or buying the property from them, for that cost.
Isn't that what got Guatemala invaded back in the 1950s?
They attempt to sell it at market-rate which, assuming the previous owner intentionally under-valued the house, would earn them money that they can use to continue the program.
What if they have a backlog of inventory that they can't sell at "market rate"? Are the taxpayers just supposed to take a loss because of this brilliant tax assessment scheme?
The idea is that the houses are being bought by the government because they were erroneously valued by the owner under market rate. That presumably gives them room to come down from "market rate" to actual market rate (the rate it sells at on the market).
The only way to end up with a loss is a coordinated attack by owners and potential buyers: to intentionally understate the value, and then to hold off ANYONE attempting to purchase before the market sale price is below the compelled price. So multiple rich people lose their houses in a naked gambit to bankrupt the government. I mean... I guess it could happen? But at that point, it's open class warfare.
The government would only buy your house if you underestimated the value of your property. You wouldn’t be able to buy a comparable house with the proceeds because it got sold for much less than it was worth.
>The government would only buy your house if you underestimated the value of your property.
Nope, that's not in the rules. It's up to their discretion.
It seems like you agree it would be bad for the government to be able to buy your house when you give an accurate assessment. So why not design it out of the rules?
The option to buy the asset is discretionary. The government can buy it for any reason at any price. Furthermore, many of these assets are not commodities. What is the value of a thing for which only one exists?
As a New Yorker I'm thrilled. LVT/Landlording Tax next pls :)
Edit: Actually, as a property tax of nonprimary residences, is this not also effectively also a Landlording tax? Will my landlord's tax bill go up because he's not residing in my building, if my building is above the threshold assessed value of $1mm? Or are >$1mm "multi-family homes" (significant % of housing of New Yorkers in BK/Queens) exempt and this only applies to condos?
> New York City’s new tax on second homes will more than double property taxes owed by many wealthy luxury apartment owners, according to tax experts.
> State lawmakers on Wednesday passed the tax on nonprimary residences in order to help close the city’s budget gap. The so-called pied-a-terre tax will be imposed on second homes valued at $1 million or more. It’s expected to raise $500 million in revenue.
> Details on the tax obtained by CNBC show that the property tax would take effect in two different phases. In the first two years – the tax years 2026-2027 and 2027-2028 – condos and co-ops valued at more than $1 million by the city’s Department of Finance will be subject to the tax. Properties worth between $1 million and $3 million will face a 4% annual tax; properties valued at $3 million to $5 million will face a 5.25% tax; and those above $5 million will face a 6.5% tax.
The rates sound a bit steep (although I'm not familiar with the baseline tax rates on properties of that value) but the principle is sound. In the UK, the equivalent tax on housing is council tax, and local councils in Great Britain (but not Northern Ireland) are empowered to double the rates of council tax on second homes.
"While the tax seems large, experts say the city’s antiquated assessment and valuation system dramatically undervalues properties, reducing the burden. City valuations can often be 10% or less of the true market value, they said."
It also mentions they plan to adjust property valuations in coming years, and when the valuations go up the rates will go down:
"After the valuation adjustments ... properties over $25 million will be taxed at 1.3%"
I dunno, 1.3% of the actual value seems.. not at all unreasonable? I live in TX and that's about what my property taxes are, for a property valued at several orders of magnitude less than any of Ken Griffin's NYC properties.
EDIT: As mil22 pointed out, this 1.3% tax is on top of the existing ~1.8% NYC property tax rate, so it's more like ~3.1% total.
> I dunno, 1.3% seems.. not at all unreasonable? I live in TX and that's about what my property taxes are, for a property valued at several orders of magnitude less than any of Ken Griffin's NYC properties.
Bear in mind, it's 1.3% on top of the existing ~1.8% average NYC property tax rate, so it may still be comparatively expensive relative to TX property taxes.
This policy appears to target ultra-wealthy investors who are just parking their assets in NYC real estate and don't reside in NY to begin with, and thus aren't paying NY state income tax.
>Taxes has no income tax. NYC plus ny state has income tax at close to 10%.
That's as may be, and for residents of NYC that's impactful.
The new law targets second homes, which are generally defined as a residence which is not your primary residence. Meaning that the folks affected are generally not NYC (and often not NY state) residents, so the NYC/NY State income tax is irrelevant, as the folks affected don't pay those income taxes.
> In the UK, the equivalent tax on housing is council tax, and local councils in Great Britain (but not Northern Ireland) are empowered to double the rates of council tax on second homes.
Very interesting to know. Many readers may not be aware that council tax in the UK is quite regressive and tops out at ~£4-5K / year on properties valued higher than ~£1M. So you can own a £5M GBP house and still pay only £5K / year for an annual effective property tax rate of just 0.1%.
This is one of the reasons buying a luxury house in the UK is comparatively quite cheap in terms of total cost of ownership compared to many states in the US where you have to pay much higher property tax rates, insurance, and so on.
So even if the council tax is doubled on a second home, you still might be paying only 0.2%. Compare that to an average property tax rate of ~1.8% in NYC (before pied-a-terre).
Yeah thanks for nothing for comparing a single kind of tax to your country, whilst your country/states don't have the excessive overall tax regimes as are present in Europe.
Nothing, absolutely nothing do we have to adjust to America, neither up or downwards.
That being said, and as much as I think Mamdani is an Ideologue, taxing second, unoccupied homes sounds absolutely reasonable (at least if they aren't rented out). Expect all kinds of shenanigans to circumvent this, but still.
> In the UK, the equivalent tax on housing is council tax
Council tax is difficult to compare to a percentage based property tax - the band based system means people in super valuable homes pay virtually nothing, at least relative to the value of the property, and each of the ~8 bands pays a fixed fee - once in the max band the tax stays the same no matter how valuable the home.
This is especially acute in places like Scotland, where the top band kicks in at anything over 212,000 and hasn't been adjusted since 1991... Essentially any new build starter home in many places will automatically be in the top band and taxed the same as some dude who bought a castle for millions.
Personally I've never thought of council tax as a property tax, even if the bands superficially are linked to it- the link to underlying property values is so broken now.
My first rented flat outta college was taxed at the highest band, and I sure wasn't rich then. It's widely argued to be a very regressive form of taxation - its opponents indeed argue it should be replaced with an actual property tax.
You missed a key detail: the NYC valuation system undervalues properties to the tune of around 10% of their actual market value. So your 6.5% tax is effectively aroubd a 0.65% tax against actual market value. That’s not bad (it’s a lot better than what I pay for my regular middle class home. Not in NYC, but I pay a bit shy of 2% annually)
Second homes (and beyond) should be taxed out of existence while people are still trying to find their first. This tax is not steep enough, but it's a start.
Taxing a pied-a-terre $40K/yr or more per year provides more resources for developing housing than simply evicting the owner and reclaiming the space. There aren't enough pied-a-terres to house the people who need housing. We need expensive premium housing to fund affordable housing at scale.
It's a luxury tax that only affects people wealthy enough to have a second home in NYC. These people, by virtue of not living there, aren't paying income tax and thus don't contribute as much as someone who is.
>t's a luxury tax that only affects people wealthy enough to have a second home in NYC.
Not exclusively though, right?
Since they are revising the valuation system to not artificially depress valuations, isnt this a global tax increase? No rate changes or extra tax for someone with a primary residence but the base is increasing, right?
>While the tax seems large, experts say the city’s antiquated assessment and valuation system dramatically undervalues properties, reducing the burden. City valuations can often be 10% or less of the true market value, they said.
>Rather than overhaul the system immediately, the city will gradually update valuations – and the tax – according to the budget documents. Starting in the 2028-2029 tax year, the property values will be based on comparable sales. Since valuations will skyrocket, the tax rates will fall to compensate.
Its part of the same law. Regardless, the appraisal changes are global, right? That is, it would apply to a $200M 17th home and a $750k residence alike, right?
some states have homestead exemptions on property tax where your primary residence gets a discount on property taxes (eg Texas); is this effectively the same thing? or is NYC limited to unoccupied second homes instead of those being rented out?
It's a revenue policy. It's effectively a wealth tax, cleverly implemented largely within the existing tax regime.
Ken Griffin spend 183 days a year in Florida, so he pays no NY state or NYC income tax. He does pay ~1.8% income tax on his $238 million home though. Now he will pay significantly more. (His property is also assessed at a far lower number.)
Real estate cannot move. If you are wealthy enough to own a second home worth at least $1M or more, you are likely very wealthy (top 2% of US households by net worth threshold is ~$5.5 million). It is a wealth tax implemented on a real estate asset component of a high net worth human's total portfolio.
It affects wealth, but the owner can also sell the property to someone who'll live in it and then they won't be taxed despite owning expensive property. So it's more targeted than a general wealth tax would be and I think the intent is to free up housing supply a bit.
Yeah not really. It generates money for the city to run their programs without raising taxes on residents. Those properties aren't being purchased by anyone who can't already get a home.
I think the revenue is probably overstated in the long run as people will find a way to offload the properties except for a select few who will consider a cost of doing business.
Also a great marketing move by Mamdami in terms of walking his talk.
Or they can move to NY "full time", if I'm understanding correctly, which will likely also improve the city's tax revenue from more of that person's expenses incurring city taxes.
I think it is unlikely anyone with a second home at these price levels is going to sell to avoid this (immaterial to them) tax. But certainly, if they do sell to someone who will occupy as primary residence, that's also a win, regardless of the coin flip (heads, wealth tax, tails, more housing for those who actively live in the city).
Edit: You start somewhere and keep tightening the policy ratchet as loopholes or other policy leakage are detected. You've found a clever hack? Congrats! The law is updated accordingly.
In reality, they will now just create a company in Singapore or Mongolia or another such place, which will then own the second home - while itself being owned by the original owner. Problem solved significantly cheaper than this new tax. In fact, I would not be surprised if they have already done that four months ago, when the law was being discussed.
The ones who will be hit are those who do not have the legal frameworks in place to erect such structures - Joe Homeowner who inherits grandmas city house, both worth slightly above the magic 7 figures.
> they will now just create a company in Singapore or Mongolia or another such place, which will then own the second home
How will that help to avoid a tax on secondary residences? Are they somehow going to claim that these properties are the primary residence of a company? Seems nonsensical.
Isn't that a good thing? It would encourage Joe Homeowner to sell the house to someone who could use it as a primary residence rather than leaving it empty and speculating on the real estate value.
Joe Homeowner already is incentivized to sell grandma's home. Homes need upkeep. No-one keeps an old home around to rot and fall down - that tends to bee bad for the evaluation. The issue is that those who can't finance a primary residence now won't be able to finance a primary residence then.
Why is this mythical "everyman" you've concocted for empathy points not selling a property he doesn't need that happens to be worth a "magic 7 figures"?
>Edit: You start somewhere and keep tightening the policy ratchet as loopholes or other policy leakage are detected. You've found a clever hack? Congrats! The law is updated accordingly.
God I hate this sort of armchair despot type thinking.
People are not stupid. They're only ok with the absurd attitude given to the government to tax and regulate insofar as it's mostly kept it out of the grubby mitts of those who'll abuse it.
Like yeah, you absolutely could strictly enforce the speed limit and use the clean water act to regulate people's lawns but if you did that someone would get elected on promises to depose you and change the law to prevent that in the future.
This is the same reason the NSA doesn't go around using zero days on movie pirates and the FBI doesn't go around bringing RICO charges on everyone who ever ran a scummy business. The power is more useful to have on hand to use surgically. If you abuse it you'll lose it.
The scope of my comment you cite is the usual "extremely wealthy people using loopholes to avoid taxes while burdening your average joe with them instead".
This is not "your math is slightly off and we're going to be punitive." This is defending against tax evasion strategies by those with the wealth and power to attempt them. If you don't believe in taxes, or don't believe the wealthy should have the majority of the burden, certainly, we will not find common ground.
My mental model is "You are very wealthy because you are very lucky. The cost to you for the societal socioeconomic system enabling this wealth is higher tax rates than those who work. Please pay your taxes due for a system that enabled your accumulation of wealth, and permission to keep it during your lifetime. If you attempt to evade the system, we will improve the system accordingly." One owes taxes on a lottery ticket, this is no different, just a different form of lottery ticket that paid out.
> While the tax seems large, experts say the city’s antiquated assessment and valuation system dramatically undervalues properties, reducing the burden. City valuations can often be 10% or less of the true market value, they said.
You have described an investment property, not an unoccupied second home exposed to the pied-a-terre tax, if you rent it out (whether mortgaged or free and clear).
Sure yeah, all those middle class families with second homes in New York City. Right.
Nobody affected by this is middle class. Nobody that will be affected by this in the next 20 years would be considered middle class by any rational measure.
Are you saying inflation is going to cause me to acquire a second home in NYC somehow? I don't think you actually understand what you're arguing about, here.
So the numbers will need adjusted for inflation. Eventually. Like any other tax. If you're making an argument it is entirely unclear what your position is.
That really depends on how you define middle class. I can easily see how someone with a net worth of 100m being considered middle class compared to billionaires.
Interesting system to compare here in Switzerland. They've never had a property tax. However they did have a tax where they calculate the putative rent you could get for your property and tax you on that income (that you don't really have). So basically a property tax.
But they just repealed that system so no more property tax but you can also no longer deduct mortgage interest from your taxes. So now the system favors people that don't have loans.
That with laws against foreigners buying property (most of Switzerland - not in some economically under devised areas though) the hope is the cost of housing will go down.
In the US land property taxes are essentially use taxes that pay for the maintenance of infrastructure that supports the property. This is why rural property taxes are very low -- there is no infrastructure that needs to be maintained that would justify the tax. Use taxes are broadly efficient.
If land property taxes were wealth taxes then you'd be able to deduct e.g. mortgage debt when applying the tax rate.
In this regard, property taxes in the US largely make sense.
Probably the least complicated tax law. Increase taxes to increase revenue. Makes sense. Align valuations with reality while maintaining relatively constant absolute tax dollar amounts. Also makes sense. It's really not that hard.
>Probably the least complicated tax law. Increase taxes to increase revenue. Makes sense.
Not so fast.
1) It is complicated. It has progressives rates that start out higher for 2 years then decreases but coincides with how the base is calculated.
2) The budget projections assumes no behavioral changes from the taxed residents. This doesn't seem like a safe assumption. You should at least assume some amount of the tax base leaves since it disincentives 2nd properties.
This doesnt mean its a bad plan. But it's definitely not the least complicated tax law. I'd say thats more like sales tax or something.
It's a good thing to try, we'll see what happens. It's interesting to see the CEO immediately threatened to pull jobs and move them to Miami. That's to be expected to some degree. The way it works that sometime a small hike is enough to trigger the behavior. It could be in protest or as a sign of more tax hikes to come.
This is also some opportunity for intra-state and intra-city arbitrage where random cities and states lean into the controversy and start offering tax incentives for the "sad" and "offended" egos of wealthy of NYC to move there. That often happens to companies, where states, sometimes down South offer such "deals" to move company headquarters from higher tax states up North.
But at the same time, this might encourage some wealthy people who "fled" to Florida to return back and make New York their primary residence.
I also see slew of loopholes popping up, couples divorcing so each can claim on of the residences as "primary"
> It is unclear how DOF will treat properties owned by LLCs and trusts. In general, these owners are not considered residents. However, this does not mean that the properties are not used as primary residences. For instance, based on publicly available information, Mayor Bloomberg established his primary residence in two adjacent buildings on the Upper East Side, one owned by an LLC, and the other a cooperative apartment corporation. It may be possible for some LLC owners to rent to themselves and avoid the tax.
Now remember they are changing how property values are assessed. So everyone's base rises and the rich with 2nd homes dont pay the extra tax because they move it into an LLC.
That's a great point. I'm guessing the politicians knew the rich would find a work around, but they're obligated to go through the outward motions so they can claim to keep their promises.
>While the tax seems large, experts say the city’s antiquated assessment and valuation system dramatically undervalues properties, reducing the burden. City valuations can often be 10% or less of the true market value, they said.
>Rather than overhaul the system immediately, the city will gradually update valuations – and the tax – according to the budget documents. Starting in the 2028-2029 tax year, the property values will be based on comparable sales. Since valuations will skyrocket, the tax rates will fall to compensate.
Hold on a second. Reading between the lines, this means everyone's property taxes are going up, right? Because the valuation system is being revised to more accurately reflect resale value.
Obviously this would affect more expensive properties more. But I havent seen anyone acknowledge that everyone's taxes will increase. Is that because I have the details wrong or because it's just flying under the radar?
Im not sure you understand what Im saying though. Wouldnt normal people's taxes go up because the appraisal changes are global? Say, a primary residence bought for $750k.
> Wouldnt normal people's taxes go up because the appraisal changes are global?
No. Our town finally reassessed everyone after not doing it since before COVID. Assessments doubled and everyone freaked out, but the tax levy didn't change, so the amount of actual tax basically didn't change; $160M in taxes for 20k people is still $160M in taxes for 20k people. People just now pay less tax per $1k house value, but for higher house values.
I'm really curious about this. Wont, as a rule, any super-rich 2nd, 3rd, and 4th homes in New York be completely unaffordable for almost everyone? It feels a bit like you're potentially spreading around the super-luxury homes across a wider breadth of the super-rich, but not much else.
If you can afford to pay $238 million for an apartment (the Ken Griffin example from the story) you can afford the annual $1.87 million in tax. That's about 0.785% tax rate.
By comparison, I have an investment property that's worth about $285k, and I pay 1.97% (about $5,800) on that in annual property tax, so esp. considering he's in Manhattan, that rate looks like a bargain.
Yes. A tax on the ultra-wealthy, rather than a measure aimed at increasing housing.
Its very roundabout as NYC can only make taxes for NYC, but the net aim is to increase the effective tax rate for the ultra-wealthy, using secondary property as a proxy for that.
Edit: AND WE (I) LIKE THIS because progressive taxation is the core play of fixing income/wealth inequality
> Wont, as a rule, any super-rich 2nd, 3rd, and 4th homes in New York be completely unaffordable for almost everyone?
??
The point is to raise revenue.
In some sense, City is calling the bluff of these deeply immoral rich fucks; the tax is incredibly affordable for them, and almost all of them will simply complain and pay it, and thus generate revenue for the City.
Well it's two-pronged right? They either keep their extra houses and pay the tax, which increases tax revenue which can be used to fund things like constructing housing in NY, or they sell them off. The people potentially buying these houses will be more hesitant themselves to buy, so they're forced to lower the sell prices, making the houses more available to the general public.
I guess three-pronged, cause it says if they turn it into a rental that it's exempt from the taxes, which means someone is still at least living in it rather than just being used as a speculative asset.
Thanks, I feel sort of stupid for failing to notice that it would if nothing else just increase tax revenue. I was stuck in a perspective that this was about increasing housing stock.
He is also aggressively going after landlords withholding repairs, maintaining dilapidated units, etc. and thus tackling the quality of the housing stock problem.
Economics always applies at the margins. If this means that no one can afford $500 million homes anymore, then builders will stop building them, and start building slightly cheaper homes. That will increase the supply of the slightly cheaper homes, so they will have to become cheaper, thus putting pressure on the even cheaper homes. Eventually, if other friction isn't too great (which is not given) the downward price pressure and increased supply should reach the regular person market.
If this has a problem, it's the difficulty of application: 2nd homes, and only if you have X amount of money, instead of just a flat increase. Property taxes (or really, in NYC land taxes, as most of the property tax is really the value of the land) are just very efficient, and make much less of a difference on the price of rents than you'd think.
Unfortunately, doing that is very unpopular. Unpopular enough that we see states trying to get rid of property taxes, and those providing limits to increases, which basically guarantee misallocation and rising prices. But what is economically reasonable and what the voters like have very little to do with each other.
I think this is in the right direction, but the cut off at $1M is interesting.
Why's there an obsession with the $1m cutoff?
The dollar has been turned to dust. $1M is not that much money, especially in housing, especially in NYC.
Why tax $1m second homes and not second homes generally? Effectively, you're going to tax almost all second homes.
So why the arbitrary cutoff?
Chicago wanted to add a "millionaire's tax" on $1m+ home sales. At least in Chicago, that isn't effectively taxing the vast majority of housing (and total value) - so there's some distinction worth having.
> While the tax seems large, experts say the city’s antiquated assessment and valuation system dramatically undervalues properties, reducing the burden. City valuations can often be 10% or less of the true market value, they said.
As TFA states, in NYC the assessed value of a home and the market value of a home are wildly different, with the assessed value being much, much lower.
This is $1mil in assessed value which would translate to roughly $5mil in market value.
In NYC $1mil market value is pretty much the starting price for a 1-bedroom condo in a gentrified area. $5mil market value, on the other hand, is a pretty luxurious place.
Below 1M in NYC it becomes unclear why you have a second home. Maybe you're not quite "wealthy" and it's really helping your family out in some way. No reason to complicate things, the cutoff actually simplifies it while sacrificing almost nothing in terms of what the tax is trying to accomplish.
Wouldn't excluding apartments therefore exclude Ken Griffin's 238 million dollar penthouse? That seems like exactly the kind of 2nd home that this should be targeting.
NYC is filled with apartments dedicated to the wealthy with token poor-doors for access to a few mandatory low income units in each building. All housing has to be subject to taxation for this to work.
1 million remains the hallmark of 'wealthy' (as in: not us), to the point where pop culture has started mocking the concept decades ago (See: That Austin Powers movie...)
Hardly everyone understands 'owning a house' as millionaire-level wealth. Which is why people cheer the policy on until they realize it is them who is being shaken down.
Sure, but it's only a shakedown if it's an unoccupied second home, which is hard to have sympathy for. It can easily be an occupied second home (family, renters) or a first home for those in the upper middle class paying for $1mm+ apartments in NYC. I'm not really worried about Jeff Bezos or some Hollywood actor's crash pad when they have business in nyc.
I disagree with the comment and entire existence of the person to whom you are replying, but they aren't wrong about $1m actually not being as big or watershed a number as it used to be.
A basic middle-class house in just about any part of the country that's worth living in is going to be $1m, plus or minus 200k.
> A basic middle-class house in just about any part of the country that's worth living in is going to be $1m, plus or minus 200k.
Help me understand your comment. Do you think the country is only made up of like, 3 big coastal cities? Do you think the only houses worth living in are several thousand square feet in only the coolest parts of town? I want to understand what you think the country actually looks like, here.
You quoted the part that clarifies this: "worth living in"
Subjective, obviously. My view is that I wouldn't live almost anywhere outside of one of the major coastal cities in a blue state. Certainly nowhere in "flyover country".
Even disregarding the fact that your description here still doesn't meet the $1M bar you set in the original comment, you are using the general term "worth living in" to describe places you would live, which is way more elitist than is typical of HN.
I too would only live in a small subset of the country (a different, but not opposite, subset from you). But I would never do something as petty as describe those places as "the only places worth living."
"that's worth living" is doing some Herculean lifting there. I'm sorry to inform you that only the wealthy can live in the places you deem "worth living". You are not using the phrase "middle-class" correctly.
I'm not coming at this from a rural perspective. I live in the greater NYC area. I have friends in NYC. They make a lot of money and live very close to Grand Central, and even they don't live in $1M properties.
I have lived in both NYC and Southern California, and I was mostly thinking about SoCal, where in general one assumes a basic middle-class house in a reasonably decent area is going to cost $1m. Do they always? Not necessarily, but even fairly modest houses like my parents house now exceed $1m in value easily.
Out of curiosity, do your friends own condos? Doesn't even a studio condo on the UES cost at least like $600k base (i.e. not counting any fees related to the sale, nor any ongoing HOA)?
> Owning a house where your equity in it is over a million is absolutely wealthy.
Only ~30% of home owners own their outright.
~60% own 40% of the house or less.
I'd argue that you can't own more than ~92% of a home, because it costs a lot to sell a house...
The "average" homeowner moves every ~7 years in the US, and this is heavily skewed to people with less equity - the people who outright own typically have stayed put 20+ years.
So "owning" a million dollar home means anything from: you put 3.5% down, and you're currently underwater cause prices went down in a lot of the US (i.e. you are literally own NEGATIVE equity)... to you actually have $1m in equity.
I "own" a $1.2m home. I really only own about $425k of it. If I had to sell it, that typically costs close to 9% - so I'd be lucky to get $300k.
The person underwater who put 3.5% down on a home could easily have -$250k if they had to sell... So the idea that everyone who "owns" a $1m house is "rich" is a bit strange...
I mean, in general, people who "own" $1m houses are not destitutely poor, but that's about as far as you can extrapolate.
I agree that owning an expensive house where you have negative equity is not wealthy (at least based on that data point itself; maybe you have a 401k or something else that makes you wealthy)
Almost nobody casually owns a second home in New York worth $1m or more. What a dumb comment (like pretty much every comment criticizing this tax--just stupid and immoral).
You are confusing owning a house with having paid off a mortgage. I can go get a mortgage for $1 million tomorrow, but that does not make me a millionaire. It makes me an debtor with a house I can't afford.
You can put 3.5% down for a $1m house in places where ~50% of the population lives.
At current interest rates, no, you can't qualify, but at interest rates where people bought most of these houses... Yes, the median person could afford it (in those areas).
They would probably be better off fixing how they asses the value of condos. Which, AIUI (and one have a good explanation?) is based on imputed rent, capped at the rent of the closest example they can find. So no condos get taxed more then the most expensive rental (I could have this wrong).
Miami? Have you checked home insurance rates lately? The thought of these NYC second home owners getting gutted by the next hurricane is rather amusing though.
The rich don't really care about insurance rates down here because they can a) pay them, b) tend to gravitate towards newer buildings that have better protection and c) have the money to retrofit older buildings with the necessary protection to lower insurance rates. Miami has the strictest hurricane codes in the country, so while there's a possibility that they may get gutted, it's probably going to be less than people expect.
I live in FL so if you have questions about insurance feel free to ask.
But the people who can easily afford the insurance in Florida can afford the new tax as well. And as an added bonus, they don't have to live in Florida!
But in all seriousness, they all already own homes in Florida.
So they can pay the higher insurance without a thought, they can pay for the relocation across the country, but they're unwilling to finance public services for the city they live in.
I support this. The purpose of a home is for people who live in the area to live in, not to be a speculative investment.
This is part of the reason we have a housing shortage in the US: 20% of available homes are purchased by investors, which squeezes the supply.
Airbnb has made this worse. There are areas near me where during the COVID ZIRP, people snatched up like 70% of the homes to turn into rentals. Those places are now ghost towns, unless it's Memorial Day weekend.
Essentially the whole problem with housing prices in the US is failure to build housing, largely forced through restrictions on building housing, including restrictive zoning.
“Some of the supply of housing that is permitted to exist is used a short-term rentals rather than as actual housing” may be “part” of the problem, but its a vanishingly small part, in that if you deal with the basic building problem, there would be no actual problem, even if the short-term rental thing continued.
For all the fear-mongering the media-zeitgeist tried to stir up about Mamdani's NYC mayoral campaign, I find his policies measured and fiscally responsible. A second mansion in NYC does seem excessive, and the tax could free up supply. The tax rate isn't outrageously high, if I'm wealthy enough, I'll just pay it, otherwise if I'm on the cusp, maybe it's better to sell and liquidate. Feels like a Keynesian policy at its finest.
I'd agree with you if this applied to primary residences, but it seems like this only applies to secondary residences? I find it hard to reconcile "middle class" with "has a second home in NYC"
the amount of people who are middle class with a second home is rare. if you can afford another dwelling, you can pay more tax on it. lets not be this disconnected.
Dumb question - what about corporations (or charities?) that own homes? Are they automatically "second homes", since a corporation has no primary residence?
Are we going to see things classified as not-residences, but then people can vacation there anyway, much like Mar-a-Lago supposedly cannot be a residence, but apparently President Trump lives there and votes there, anyway?
As I understand it many of the very wealthy do not "own" properties directly but control LLCs that do. The chain of trust/LLC ownership can be complex. Also as I understand it, this legislation does not really answer that call effectively -- though I have, of course, not read the full legal text myself.
I suppose in Ken Griffin's case, even if his residence is owned by an LLC he controls, he is known to reside in it. But how effective is this legislation when the purpose of LLC ownership is expressly anonymity and accounting convenience?
If you want to tax the ultra-wealthy, prevent Securities-Based Loan (SBL) or a Securities-Based Line of Credit (SBLOC). Honestly this is how EVERY SINGLE wealthy person gets around paying taxes.
Stocks should be bought and sold, period the end. That is how the market is supported to work.
If you closed this simple loophole, you would see a massive amount of tax revenue.
This argument is used again and again and I wonder: Why do "people with money" stay where they are when there are countries, islands, even just states where there is less taxes to pay?
> This argument is used again and again and I wonder: Why do "people with money" stay where they are when there are countries, islands, even just states where there is less taxes to pay?
Like others said in the comments here: there's a balance of how much money you have to pay as tax until you move to other places. New York is taxing people on top of whatever other taxes are there just because they have money.
My issue is that if people earned the money fair and square, they shouldn't be taxed because they were successful. And this is what this tax does: oh, you afford to buy a 10M home, here's an X% annual tax just because.
I ran a company in NYC for six years before the taxes and onerous regulatory environment convinced me to bail.
The final straw was when we had to hire a fixer to clear up a state regulatory error that would’ve destroyed our business. No amount of calls or letters over months — by me — fixed the issue. The guy we hired got it cleared up in a week.
That’s how I learned firsthand that the more involved the state tries to be in protecting everyone from everything, the more opportunity there is for bad actors and gross inefficiency, and the worse things get.
It's not the "people with money" leaving. There's equal evidence of people with money staying and people with money leaving.
It's people who use their money to generate more value and employ lots of people that are, consistently, leaving. That means that thousands of jobs for the lower middle class are leaving and going to somewhere with a more favorable business environment.
And that's not good (well, it's good for the other city).
It's easy for people in tech hub cities to think that's never going to change but history shows boom towns going bust repeatedly. Sometimes they come back (Seattle). Sometimes they don't (the whole Rust Belt + Upstate NY).
And once the talent pool from a few large companies moves to another metro, whole industries relocate their offices to chase it.
Are Seattle, the Rust Belt, and upstate NY examples of higher taxes driving wealthy job-creators out? I think they were the opposite: the market moved and then the wealthy people left to follow it.
NYC has always been extremely expensive, and people have largely decided that it's worth the price. I don't see how a little wobble in either direction changes that. Everyone could have already moved to Miami, or Salt Lake City, or even cheaper places if they were actually price-sensitive.
A "little wobble" may not change it more than a "little", but enough "little wobbles" over time become a "big wobble" that may change it in a "big" way. The right question to ask is: what's the elasticity? So far the elasticity of domestic migration to tax increases has been smaller than many expected due to network effects and inertia, but nevertheless if you look at the population growth rates of high tax states like CA and NY and compare it to low tax states like FL and TX, you will definitely see a pattern. Rational people think on the margin. Perhaps only a few people will move if you increase tax rates by 0.1%, but more on average will decide to move than if you hadn't raised taxes - the question really is, how many?
I think there is a real argument here that everyone will love to yell at you. Same thing happened with California. Its always a balance -- if the tax is too much people will leave, if they get the number just right in that its a nuisance and not material they will stay.
Though when you start engaging with the bots they can't handle the nuance.
Property tax is the workable wealth tax. There's no such thing as a perfect policy, but in the context of NYC this seems worth trying. I'll be interested to see if it helps create some liquidity in the housing market (the goal), or if it only functions as revenue source.
One wrinkle I haven't heard much discussion of -- cities respond to incentives too. NYC is a global destination for the mega wealthy. If it turns out the uber-rich don't mind paying and this becomes a cash cow for the city, that creates incentives for the city to cater to them and try and get more uber-rich people to have second homes in the city.
> If it turns out the uber-rich don't mind paying and this becomes a cash cow for the city, that creates incentives for the city to cater to them and try and get more uber-rich people to have second homes in the city.
The tax is reasonably small enough that I wouldn't expect a lot of wealthy people from divesting from their properties, but it's probably going to make them think twice about buying new properties.
That second-order effect is the important balancing act for any locality-based wealth tax. If you make the tax too high it starts discouraging the behavior you're taxing, which can paradoxically reduce overall tax revenue.
France discovered this the hard way when they implemented their first wealth tax: Many ultra-wealthy people moved their capital out of France to avoid the tax, which was suspected to have had an overall decreasing effect on tax revenue from that demographic. They replaced the wealth tax with a property tax, which probably played a large role in inspiring this pied-à-terre policy.
"If you make the tax too high it starts discouraging the behavior you're taxing, which can paradoxically reduce overall tax revenue."
I am generally against more taxes, but the structure of this one is quite good in terms of the incentives. If wealthy people who only live in the city part-time stay in hotels instead of buying second homes, the net effect should be to increase the cost of hotel rooms and reduce the cost of owned-housing. NYC charges nearly 10% tax on hotel stays, so recoups some of the cost there. Having property in your city mostly being occupied by people who live their full time, particularly when property is already very expensive, seems like a good thing overall.
> increase the cost of hotel rooms and reduce the cost of owned-housing
Reducing the cost of $5M+ homes will slightly help some wealthy people who live in NYC, and there will be a modest trickle-down effect into less expensive properties. But I thought the goal was to generate tax revenue from the taxes, which wouldn't happen to the extent they end up in the hands of NYC residents.
I'm not sure why if you or I were to expatriate and let go of our US citizenship, we'd still be on the hook for taxes for (iirc) 15 years, but the ultra wealthy can get away with tax havens while remaining citizenship and reaping the benefits of protection by X state.
What prevents the tax following the offshoring attempts? Is it simply that the IRS doesn't have the manpower? or is there a legal loophole for avoiding paying your share that only works for the ultra wealthy?
Turns out it's an old law, if you expatriated between 2004 and 2008, and spent 30+ days in the US within 10 years of expatriation.
> Further, expatriated individuals will be subject to U.S. tax on their worldwide income for any of the 10 years following expatriation in which they are present in the U.S. for more than 30 days, or 60 days in the case of individuals working in the U.S. for an unrelated employer.
I think its a good idea in general to tax the second property for any country where housing is a struggle. Its usage based taxation so fair in some sense. Housing is somewhat of a critical asset for a normal safe life. Commercialization of housing properties creates a circular effect on the pricing, thereby increasing the cost of almost everything else.
The goal of this isn't simply to raise revenue, it's also to discourage parking money in empty properties when it's one of the most expensive cities to live in and doesn't have enough housing
>it's also to discourage parking money in empty properties when it's one of the most expensive cities to live in and doesn't have enough housing
Is that really needed when the homeowner vacancy rate is 1.3% in the New York-Newark-Jersey City MSA?
https://www.census.gov/housing/hvs/data/rates.html
No, the goal is to overhaul the property tax system.
This is going to raise property taxes for everyone.
The ultra wealthy can just pack up and move. It doesn't affect them in the slightest.
But in two years when the property tax overhaul is complete, the middle class will foot the bill. As per usual.
Can you explain how that would happen? This tax is limited to second homes only.
this is literally a cover to overhaul the property tax assessment system in New York.
https://www.msn.com/en-us/money/companies/new-york-passes-ma...
"While the tax seems large, experts say the city's antiquated assessment and valuation system dramatically undervalues properties, reducing the burden. City valuations can often be 10% or less of the true market value, they said.
Rather than overhaul the system immediately, the city will gradually update valuations – and the tax – according to the budget documents. Starting in the 2028-2029 tax year, the property values will be based on comparable sales. Since valuations will skyrocket, the tax rates will fall to compensate."
this is a 10% increase in ALL property taxes.
it will just make rent higher.
Expensive cities will never have enough housing. The cure is to discourage investment in them and force it into less dense cities.
They are expensive largely because of housing so your statement is a bit of a tautology.
Historically NYC housing used to be a lot more affordable before they stopped building, reducing supply relative to demand and thereby raising prices.
> If you make the tax too high it starts discouraging the behavior you're taxing, which can paradoxically reduce overall tax revenue.
The Law of Supply and Demand is not a paradox.
Land value taxes don't discourage desirable behavior when raised.
Property taxes might discourage construction but if land values are high enough then property taxes approximate land value taxes.
Raising income tax on the other hand discourages working even when it is set very low. This is one which ought to be lowered if anything.
tl;dr it doesnt work the same way for every tax.
Are there good sources on income tax discouraging working? My rudimentary google searches are mixed, between it being a disincentive, and forcing people to work more for the same income.
>Land value taxes don't discourage desirable behavior
Are you serious? LVTs expressly incentivizes landlords to kick out "grandfathered in" developments and uses in favor of redevelopment and sale for that purpose.
But those grandfathered in developments and uses are exactly what made the place valuable in the first place and you need some amount of them to remain.
Redevelopment often mitigates housing scarcity in general, including for existing residents. They may have to move to a slightly smaller apartment within a generally much improved area, which usually leaves them better off. This is especially true for LVT, which amounts to a decrease in property tax for the improvements to land.
The fairest and easiest to realize wealth tax is on inheritance. It is great to want to give your kids a headstart in the world, it is terrible for them and the people around them to set them up for life.
> It is great to want to give your kids a head start in the world, it is terrible for them and the people around them to set them up for life.
How is it terrible for my kids to not have to break their back like I did to build the wealth I'm looking to pass on to them after I die? Why should they go through the same struggles that I did? It is up to them to squander it or transform it into even more wealth to pass it down to their children and so on. Ideally the former, but sometimes what parents dream for their children does not always come to pass.
It's really not the easiest. You have to prevent gifting things at a lower tax rate while alive. That means it comes bundled with income tax or gift tax implications.
Fairest? I mean, land value tax is fair. So are Pigouvian taxes. In fact they're arguable more than fair. Not having these taxes is arguably unfair. Who deserves ownership of natural resources or to inflict negative externalities on others?
Taking things someone earned through labour and not letting them give it to who they want isn't very fair.
I think to everyone but a nepo baby it's clear that the children of the rich don't deserve their wealth.
> wealth tax is on inheritance
As a point on terminology: That's not a really a wealth tax on the accumulated assets at-rest own by the (now eternally-resting) owner, but an income tax on the wealth as it moves to the recipients who didn't have it and are getting a massive gift.
It just happens to be a kind of gift/transfer we've decided because of tradition to consider as a special case, where (A) it happens right after a given dies and (B) the giver is frequently but not necessarily related to the recipient.
The problems with inheritance tax is that they can be avoided through trust structures and insurance schemes. In theory it's a good tax, but in practice many wealthy people figured out how not to pay it.
Those schemes are also human-created though, and can be human-fixed. I've never really understood the arguments that go like: "This regulation won't work because the people it targets will avoid it through loopholes and other schemes." Well, get rid of the loopholes and schemes, then!
Granted, this requires lawmakers to explore more of the "exploit space" around their proposed regulations, but I don't think that's really asking a lot of them.
Just curious what you think the correct solution is? You're rich, you have a kid, you die when the kid is 2yrs old. So they get nothing? 12? 22? 32?. Is there some "correct" number? If you're raising them in some $100m home do they get booted out and put in a tenement?
On the other hand, most people die closer to 75-80 and their kids are 50+. Leaving inheritance to them isn't really spoiling them as they are alread adults with established lives.
In the US, the inheritance taxes don't kick in until $15M ($30M for married couples). Even at 2 years old, a child can inherit more money than most people will make in their lifetime before a dime is paid to the IRS.
Estate taxes kick in at much lower threshold in most States. Washington had to repeal their recently created 35% estate tax (for a combined 75% rate) due to overt capital flight to places like Idaho. The exemption in Washington is $3M.
I don't care about estate and inheritance taxes much but many people do and it empirically drives behavior.
Federal inheritance taxes. There are also state inheritance taxes in many states. NY, for example, kicks in at ~$7M. MA kicks in at $2M.
> NY, for example, kicks in at ~$7M.
Won't someone think of the children? The very wealthy children paying a 3% marginal tax rate on some of their multi-million dollar inheritance?
poor little multimillionaire :( my heart breaks for their 90th percentile wealth.
I would disagree, I think income taxes and inheritance taxes are morally wrong. Earning money to support oneself and family instead of relying on public largesse should not be taxed. Passing the fruits of a lifetime of work to ones heirs so they can continue do productive work instead of relying on public largesse should not be taxed.
> Earning…
Inheritance is, notably, not earning it.
> continue do productive work
That's a pretty bald assertion. Useless nepo babies abound.
> relying on public largesse
Any chance the existence of a stable, well-educated, high-trust society benefits the children of wealthy people at all?
Yes.. spend enough time amongst the inheritocracy and you'll see the wealth is as often as not wasted on them.
There's just too much fun to be had with 0.1% wealth that you didn't have to sacrifice your 20s, 30s (and maybe 40s) to build. Coast at some job with a top 25-50% income and 0.1% inheritance in NYC and live the life.
So if you're spending your inheritance living the high life, that economic activity benefits a lot of other people. Still a net positive in my view.
I get the political power concern, and money = power at a certain point. But I'd rather work on getting money out of politics than putting limits on what people can decide will happen to their assets after they die.
The problem is that theres a lot of stuff in the tax code that allows those at the higher end to also defer taxes indefinitely. So not taxing estates/inheritance, and allowing these deferrals leaves assets untaxed at the high end forever.
For example, step up basis allows inherited assets to have their cost basis re-struck at the value at time of inheritance. So if there is no inheritance tax, the assets transfer to a new owner and a large chunk of value is forever untaxed, even when/if they eventually sell.
Similarly all sorts of interesting stuff that can be done with trusts. Again stuff that's only accessible / worth the hassle to 1%.
In a world with extreme outcomes due to scaling, we might accidentally be re-inventing the hereditary aristocracy if the assets can accumulate outside the tax system.
I'm curious how you envision money ever leaving politics. I hear this phrase often and every time I do it feels more and more nonsensical. Politics is what we call the social aspect of resource management (it's often called "political economy" for this reason). The only way I can see to remove money from politics is to create a society that has no money at all. I assume that isn't what you mean?
I'm sure it can't be removed entirely, but we could, for example, start imprisoning people who give or accept bribes.
We already do that.
- Bob Menendez (Senator)
- Randy Cunningham (Congressman)
- William J. Jefferson (Congressman)
- James Traficant (Congressman)
And a bunch more at more "local" level...
Right it seems like one of those libertarian perfect-world talking points that ignores the impossibility of implementation.
There's so many indirect ways of influencing politics given lots of money - alternative media, buying out local news, controlling national news.. making entertainment media of your own ideology. Fund interesting groups around particular topics. Give poor Ivy League grads a job and groom them for higher office.. oh wait.
Sure, and rape helps the therapy industry.
https://en.wikipedia.org/wiki/Parable_of_the_broken_window
Bastiat was opposed to inheritance taxes. He wrote about this in Economic Harmonies. I think he'd call the connection you're trying to make a stretch
>I would disagree, I think income taxes and inheritance taxes are morally wrong.
So what taxes aren't "morally wrong"?
Consumption taxes and sin taxes.
Consumption tax is sales/VAT tax excluding some necessities and capital goods. Yes, there are some awkward edge cases: in the UK the exclusions were food and children's clothes, which leads to battles over prepared cold food (e.g. sandwich), takeaway and restaurant dining.
Sin taxes are obviously things society might want to discourage, mainly for health reasons, like alcohol and smoking, but also gambling and externalities, like pollution. Some might stretch that to all carbon emissions to moderate climate change.
Don't tax things you want: working / income and investment / capital gains.
Inheritance tax is doubly wrong because the wealth is already taxed, and death is unavoidable (but emigration is possible, which might help in some countries).
Consumption taxes disproportionately impact the less wealthy, who spend most of what they earn on consumption of necessities.
> Don't tax things you want: working / income and investment / capital gains.
What if I don't want hoarding of wealth?
> So what taxes aren't "morally wrong"?
Taxes on somebody else.
Property taxes on real property or possibly land value tax (it's a limited resource, at least in places where people want to live, and requires a lot of public infrastructure to support its value there).
Tariffs, various usage taxes and fees.
Need a mechanism to address the regressiveness of some of this but that's an implementation detail.
How is dynastic wealth not immoral?
Their take on inheritance taxes is insane, but I tend to agree that income taxes are immoral. Corporations get taxed on profits: If OkayPhysicist, Inc. spends $200 to make $300, it would be taxed some fraction of $100. Individuals, on the other hand, get taxed on revenue. It doesn't matter if it costs me $4000 in rent, groceries, transportation, etc., to make $6000, I'm getting taxed on that full $6000.
Capital gains taxes, on the other hand, are completely moral, and should be much, much higher. Capital investment benefits enormously from the State protecting their property "rights" (you don't need to hire a private army to prevent the workers from just deciding to run your factory for their own benefit, that's what the cops are for), and at a minimum the state would be justified in collecting that dividend for itself. Bootlickers and profession bootlickers (i.e., economists) would complain that a high capital gains tax disincentives investment, but as long as the value of investment is positive, that is, outpacing inflation, it makes zero sense to let your money languish in a Scrooge McDuck pile rather than get some value out of it.
>It doesn't matter if it costs me $4000 in rent, groceries, transportation, etc., to make $6000, I'm getting taxed on that full $6000.
So if I spend $5000 on groceries because I'm eating wagyu steak and lobster everyday, is that a fair "expense" too? You might retort that's obviously a luxury and there should be some baseline that's tax free, but then you're just describing the standard deduction.
>but as long as the value of investment is positive, that is, outpacing inflation, it makes zero sense to let your money languish in a Scrooge McDuck pile rather than get some value out of it.
...or they take their money elsewhere instead.
And I think that inheritance, while a natural desire, is morally wrong. It's an example that desires aren't always congruent with morality. People will go to great lengths to justify their conclusion.
Are gifts morally wrong? If I'm near death is it wrong for to give my assets to my children beforehand, or does it only become immoral if done via a will?
> while a natural desire
Or look at monarchies and titles of nobility. In the past direct inheritance of political assets was common, and acting on that natural desire, the people involve claimed that parents deserved to direct what they (and their ancestors) had accumulated on to the next generation of their own family.
Yet nowadays most countries and people have decided it is immoral, and they also took steps to make common forms of it extremely illegal.
My point is that economic inheritance today is just as much a social-construct as political inheritance was then. It exists because we permit it to exist, don't be fooled by anyone claiming it's an intrinsic law of the universe or a divine mandate by god that must be obeyed.
First one makes sense, second one I’m quizzical about.
Inheritance taxes tend to only kick in at the 8+ digit range.
If anything, taxing that should encourage descendents to do productive work, eh? Since not taxing it, but taxing other things actually discourages it?
I can’t imagine how it would result in anyone relying on public largesse either unless they are really terrible with money. In which case a few extra zeros is unlikely to help any?
I suppose like with many things it's a question of scale. A little is good, more is better, but at some point it may start to have negative consequences.
> It is great to want to give your kids a headstart in the world
I might live till 72, my kids will be my age right now when they hit inheritance instead.
That's not a headstart.
The federal estate tax is 40%. NYC adds in another 16%.
> The federal estate tax is 40%
It's misleading to cite that since it basically never happens.
The tax doesn't even come into the picture for fortunes below $30 million dollars (for two parents), and the rest of the time it averages ~14%.
https://www.cbpp.org/research/federal-tax/the-federal-estate...
16% on the portion over $10M
So you want to tax something that has already been taxed throughout the course of someone's life, just because they want to give it to their kids?
The only tax that is fair to everyone is a sales tax.
I live in South Africa where we have 15% VAT.
When I was little and playing SimCity 2000 I looked at the tax rates for the city and noticed that the sales tax rate was like 2%, and based on our 14% VAT at the time, it seemed super low to me so I upped it to 12% and was surprised at how unhappy the citizens were.
This gave me the impression that Americans wouldn’t be happy with a significant sales tax, or perhaps this was a city sales tax on an existing state sales tax, which yes, would be outrageous, or maybe Americans get taxed in some other way which makes up for our VAT.
Anyway, I look back and chuckle at my own lack of knowledge at the time.
I would love a VAT tax instead of the never ending stream of taxes we pay on everything else.
Americans are stupid. They see a higher tax on an iPhone they don't need, they will cry about it.
But they pay more at the end of the year on income tax, property tax, car registration, etc., they could care less.
Most Americans don't even look at their pay stub, and are more than happy to overpay their income taxes every paycheck so they get a bigger tax return at the end of the year.
They don't realize that money was theirs to begin with.
They complain about not being able to become wealthy while they give the government an interest free loan, when they could be investing that money and earning on it.
Yup, very "Georgist", which I'm a huge fan of. You can move your money to another country, or hide it entirely in stocks that you borrow against until you die. But, you gotta live somewhere. Land is the only thing the state really has, and it's limited; it's the best thing to tax.
> helps create some liquidity in the housing market (the goal)
Is that the stated goal? I thought the goal was to generate revenue from the tax. It's true that triggering sales will create a one-time boost in sales-related taxes, but that's just temporary.
> Property tax is the workable wealth tax.
There is a difference between property-as-primary-residence and property-as-secondary/tertiary-residence or property-as-proxy-for-parking-money.
Property taxes handle the first scenario, wealth taxes handle the latter.
In San Diego we're voting on a new property tax that only applies to nonprimary residences.
The landed gentry want you to believe that they can't be touched unless you're willing to kick your grandmother to the street, but we can absolutely write taxes that apply more narrowly, and sensible tax policy leads to better outcomes and fewer market distortions than hamfisted regulation.
Toronto has had a vacancy tax for a couple of years now:
* https://www.toronto.ca/services-payments/property-taxes-util...
Who benefits most of a city being improved by tax dollar spending? Property owners. They benefit in the range of hundreds of thousands of dollars to millions of dollars each. Thus it makes sense they contribute the most tax dollars.
Or show me a worker who benefits the same amount of money from the city being improved.
This also closes some loopholes/arbitrages around declaration of primary residence for purposes of NYC income tax. There are C-suite execs who declare residence in CT/NJ while spending < 180 nights/year in NYC in their huge apartment, allowing them to avoid NYC income tax.
Anyway, NYC real estate taxes are a mess and in some cases regressive.
For example, taxes are based on values set by the city which for the ultra high end, the are understated by an ORDER OF MAGNITUDE..
See: > Griffin purchased his 24,000-square-foot penthouse at 220 Central Park South in 2019 for $238 million. ..t he city values the apartment at just $15.5 million .. property tax bill for the 2026-2027 tax year is $858,332
.. Griffin’s property tax bill would more than double to $1.87 million .. in the 2028-2029 tax year, it would increase to just under $4 million
I don't feel terribly about someone paying $4M on property probably worth close to $400M at the moment. Normal high income NYers already pay $10-20k/year on properties worth $1.5M by comparison.
Another regressive aspect there was a proposal to change was a purchase tax for cash purchases. Currently one of the closing costs in NYC/NYS is a mortgage recording tax of nearly 2% of mortgage amount. This means if you are rich enough to buy in cash, you can avoid this tax. And if you are a rich cash buyer you are probably buying a higher end property so.. doubly regressive in a sense.
Property taxes have the added benefit to lower property prices, and the money can go on improving the city. (Which make properties prices go higher)
> I'll be interested to see if it helps create some liquidity in the housing market
lol. why would it? if you tax something, you get less of it.
there is not even close to any kind of shortage of demand for housing in NYC. there is an enormous shortage of supply; it is in fact _illegal_ in most places to build more supply.
The tax is only on non-primary residences - one person owning multiple homes. I don't expect it to have a significant effect on housing supply, but I think it logically could.
No, a tax will always reduce demand \saying otherwise basically ignores decades of established economics.
> that creates incentives for the city to cater to them
What does that even mean? If catering to the wealthy was profitable, everyone would do it. Just look at Dubai, it's built entirely around that model, and it's a brutally competitive space. NYC attracts the mega-wealthy for a different reason: network effects. Meta-wealthy come to be around other mega-wealthy people.
Property tax is not a workable wealth tax.
It's a barrier for low income people to buy homes.
Sales tax is a workable wealth tax.
How will consumers not bear the brunt of property taxes?
What do you mean? It's not a tax on commercial property.
One effect might be that wealthy non-residents prefer to stay in a hotel when they visit New York? The amount of money being collected as property tax would pay for a very fancy suite.
I imagine there will be luxury hotel conversions.
> It's not a tax on commercial property.
This makes more sense; I had engaged with just the phrase "property tax" without this qualification.
You sound like you feel the need to criticize this tax because you want to reflexively attack any idea whereby the rich have to pay their fair share of anything, and thus have strung together a bunch of tokens that seem relevant to you, but actually don't constitute a logical response at all to the issue being discussed.
What a needlessly aggressive post, and guilty of what you're accusing them of.
Who is the "consumer" in this case?
Because it's a tax I think on second properties.
Yes and the second property must be mostly vacant, ie. not rented out as the primary residence of some other occupant.
Separate commercial and residential rates? The first $X dollars are not taxed?
We can and have done this.
...of property taxes on second homes valued > $1M?
The elites always promise us trickle down economics, maybe this time it will happen. I wont hold my breath though.
I think this is sarcasm, but in case it's not isn't this the opposite of trickle down? Trickle down means lower taxes for the wealthy so they'll then have access to those extra funds to create jobs (through direct and indirect actions (investing in their companies, buying more stuff, etc.)). This is actually taking money away from the wealthy.
If this works (meaning NYC gets the revenue without kneecapping those extra property taxes in the long run because the wealthy bail on their second homes, which would drive down prices and therefore property taxes), it would be an anti-trickle-down win.
edit: grammar
Yes it's definitely the opposite of trickle down. Higher taxes on the wealthy to reduce income inequality and provide more funding for social programs
Trickle down economics is a political label to criticize Reagan era policies, it’s not an actual thing.
It's a label for a very real tax policy and the advertised reason behind it, it's definitely a thing (or was, at least, the argument is less common today)
> The elites always promise us trickle down economics, maybe this time it will happen.
Are you under the impression that the wealthy keep their money in a savings account?
They have more money than they can spend so they invest it, what do you think investment does?
To what degree do they really invest it? A lot of rich people just buy shares (other than at an IPO) and just move money around each other's pockets rather than investing in something wealth creating, or just swap already-existing overpriced properties around each other.
> move money around each other's pockets rather than investing in something wealth creating
So your claim is that wealthy people aren't interested in generating more wealth for themselves? What exactly is it you are claiming? Sounds like something a populist youtuber would say.
Currently it seems to be funding frenzied investment in data centers.
> what do you think investment does?
Accrue more money pretty much indefinitely?
When you invest money it disappears from your control and you get a piece of paper that says you own shares in an entity.
And if you're investing in, say, a Fabergé egg, that's a (potential) problem.
If you invest in $AMZN, much less so.
> If you invest in $AMZN, much less so.
But that's only because there are other people who will happily move money into your control to get that share from you. Doesn't change the fact that the money you spent acquiring it has moved out of your control onward in the economy.
It's not really that "out of my control" if I can convert it back to cash with a few clicks of a button.
The share is under your control, the money isn't. Being able to convert it at will doesn't change that. Also how much if anything it's worth when you go to convert it isn't under your control either.
> Being able to convert it at will doesn't change that.
Liquidity doesn't matter? Huh.
That's a Nobel Prize in Economics waiting to be awarded, if true.
Push up asset prices mainly - so locking poorer people out of (e.g.) home ownership.
Money is not a tangible thing, you can't eat or drink it. Instead it is a signalling protocol for resource allocation. If the very wealthy have many empty homes, when many people are homeless or inadequately housed, then that signalling protocol has failed (from a social justice point of view), and 'trickle down' is not working.
what does this even mean?
> While the tax seems large, experts say the city’s antiquated assessment and valuation system dramatically undervalues properties, reducing the burden. City valuations can often be 10% or less of the true market value, they said.
I heard about a system for this that struck me as brilliant. Make someone declare the value of their property. Then the government has the choice of taxing them at the scheduled rate, or buying the property from them, for that cost.
TADA.
And if someone wants to artificially inflate the value of their home, to reflect the difficulty of moving out, finding a new secondary residence, etc, then that's their business. No worries. We'll tax that additional value, no problem.
I think this system goes back thousands of years. Why not use it?
> Why not use it?
It dramatically cuts housing security, and allows local governments to inflate their own property values by doing what is basically eminent domain without the requirement to show need. Make everyone pay taxes, use those to buy up homes, re-list the homes at a higher price. They can effectively price gouge using tax dollars. This could happen to you at literally any point, and that local government doesn't care if the house won't even sell as long as the other houses rise enough in value to cover the lost tax revenue.
I've also heard the same thing but allowing private citizens to buy them, which is almost worse. Anyone sufficiently well off can just wreck someone else's life. If I hate my neighbor and they report the real value of their house, I can force them to sell it to me so they have to move and I can resell it while only losing fees in the process. They would have to over-value their house by an amount that I'm not okay losing, which ends in a sort of auction of escalating values. At the very tippy top, if I'm Warren Buffet's neighbor there's probably not a value I can pay taxes on that would stop him from buying me out if he wanted. Any number that would be a meaningful loss to him is something I can't even pay the taxes on.
It isn't done because it has overt pathological economic characteristics. This forces the owner to write a long-term call option on a non-commodity asset without even collecting the offsetting risk premium expected for such a call option. This puts the asset permanently underwater by construction, which would crater asset values. The maths don't math. You can't just pick one side of a balanced equation and pretend the other side doesn't exist.
At least as important, this scheme is trivially exploitable for corruption and weaponization by government officials in countless ways that don't currently exist. This is not something that anyone should want to enable.
When people start using financial terminology outside the natural context, it's either gish gallop or justifying antisocial behavior.
It is a good thing this is the natural context for this terminology then, being the literal domain for which the terminology exists. If someone doesn't understand the fundamental concepts being discussed then why should anyone give credence to their opinion?
Your "gish gallop" and "justifying antisocial behavior" dismissal is almost literally how creationists dismiss discussions of evolution.
> Make someone declare the value of their property. Then the government has the choice of taxing them at the scheduled rate, or buying the property from them, for that cost.
Isn't that what got Guatemala invaded back in the 1950s?
What happens after the city buys it?
Also, most municipalities do not have the funds on hand to buy up people's houses just to call their bluff on taxes.
They attempt to sell it at market-rate which, assuming the previous owner intentionally under-valued the house, would earn them money that they can use to continue the program.
What if they have a backlog of inventory that they can't sell at "market rate"? Are the taxpayers just supposed to take a loss because of this brilliant tax assessment scheme?
I assure you, unloading property in NYC purchased below actual market value will not be a huge challenge.
You might be surprised how the gov't threatening to take your house every year affects prices. And the ability to get mortgages. And new construction.
> You might be surprised how the gov't threatening to take your house every year affects prices.
Which they won't do if it's assessed appropriately.
See California's Proposition 13 for the alternative.
The idea is that the houses are being bought by the government because they were erroneously valued by the owner under market rate. That presumably gives them room to come down from "market rate" to actual market rate (the rate it sells at on the market).
The only way to end up with a loss is a coordinated attack by owners and potential buyers: to intentionally understate the value, and then to hold off ANYONE attempting to purchase before the market sale price is below the compelled price. So multiple rich people lose their houses in a naked gambit to bankrupt the government. I mean... I guess it could happen? But at that point, it's open class warfare.
conservatorship
So in the end, the government still needs a department that assesses properties to determine if the owner has undervalued it.
> Then the government has the choice of taxing them at the scheduled rate, or buying the property from them, for that cost.
Uhh... what? How is this not an insane system?
1. You give an accurate, good faith projection.
2. Government taxes you.
Government buys your house. Weird. You buy a comparable house with the proceeds.3. Repeat.
For the tax authority (and the public) it's a win/win:
1. Property is taxed at correct rate (win)
2. City buys property at low cost (win)
Thats not the scenario I detailed. Read it again.
The government would only buy your house if you underestimated the value of your property. You wouldn’t be able to buy a comparable house with the proceeds because it got sold for much less than it was worth.
>The government would only buy your house if you underestimated the value of your property.
Nope, that's not in the rules. It's up to their discretion.
It seems like you agree it would be bad for the government to be able to buy your house when you give an accurate assessment. So why not design it out of the rules?
The option to buy the asset is discretionary. The government can buy it for any reason at any price. Furthermore, many of these assets are not commodities. What is the value of a thing for which only one exists?
Ignore the downvotes -- that is an insane system.
As a New Yorker I'm thrilled. LVT/Landlording Tax next pls :)
Edit: Actually, as a property tax of nonprimary residences, is this not also effectively also a Landlording tax? Will my landlord's tax bill go up because he's not residing in my building, if my building is above the threshold assessed value of $1mm? Or are >$1mm "multi-family homes" (significant % of housing of New Yorkers in BK/Queens) exempt and this only applies to condos?
> New York City’s new tax on second homes will more than double property taxes owed by many wealthy luxury apartment owners, according to tax experts.
> State lawmakers on Wednesday passed the tax on nonprimary residences in order to help close the city’s budget gap. The so-called pied-a-terre tax will be imposed on second homes valued at $1 million or more. It’s expected to raise $500 million in revenue.
> Details on the tax obtained by CNBC show that the property tax would take effect in two different phases. In the first two years – the tax years 2026-2027 and 2027-2028 – condos and co-ops valued at more than $1 million by the city’s Department of Finance will be subject to the tax. Properties worth between $1 million and $3 million will face a 4% annual tax; properties valued at $3 million to $5 million will face a 5.25% tax; and those above $5 million will face a 6.5% tax.
The rates sound a bit steep (although I'm not familiar with the baseline tax rates on properties of that value) but the principle is sound. In the UK, the equivalent tax on housing is council tax, and local councils in Great Britain (but not Northern Ireland) are empowered to double the rates of council tax on second homes.
Well, you need to read the rest too:
"While the tax seems large, experts say the city’s antiquated assessment and valuation system dramatically undervalues properties, reducing the burden. City valuations can often be 10% or less of the true market value, they said."
It also mentions they plan to adjust property valuations in coming years, and when the valuations go up the rates will go down:
"After the valuation adjustments ... properties over $25 million will be taxed at 1.3%"
I dunno, 1.3% of the actual value seems.. not at all unreasonable? I live in TX and that's about what my property taxes are, for a property valued at several orders of magnitude less than any of Ken Griffin's NYC properties.
EDIT: As mil22 pointed out, this 1.3% tax is on top of the existing ~1.8% NYC property tax rate, so it's more like ~3.1% total.
> I dunno, 1.3% seems.. not at all unreasonable? I live in TX and that's about what my property taxes are, for a property valued at several orders of magnitude less than any of Ken Griffin's NYC properties.
Bear in mind, it's 1.3% on top of the existing ~1.8% average NYC property tax rate, so it may still be comparatively expensive relative to TX property taxes.
Good point, I missed that.
Taxes has no income tax. NYC plus ny state has income tax at close to 10%.
This policy appears to target ultra-wealthy investors who are just parking their assets in NYC real estate and don't reside in NY to begin with, and thus aren't paying NY state income tax.
>Taxes has no income tax. NYC plus ny state has income tax at close to 10%.
That's as may be, and for residents of NYC that's impactful.
The new law targets second homes, which are generally defined as a residence which is not your primary residence. Meaning that the folks affected are generally not NYC (and often not NY state) residents, so the NYC/NY State income tax is irrelevant, as the folks affected don't pay those income taxes.
Just to clarify, income over $5,000,000/year is taxed at 10.3%. Under a million is 4-6%.
> In the UK, the equivalent tax on housing is council tax, and local councils in Great Britain (but not Northern Ireland) are empowered to double the rates of council tax on second homes.
Very interesting to know. Many readers may not be aware that council tax in the UK is quite regressive and tops out at ~£4-5K / year on properties valued higher than ~£1M. So you can own a £5M GBP house and still pay only £5K / year for an annual effective property tax rate of just 0.1%.
This is one of the reasons buying a luxury house in the UK is comparatively quite cheap in terms of total cost of ownership compared to many states in the US where you have to pay much higher property tax rates, insurance, and so on.
So even if the council tax is doubled on a second home, you still might be paying only 0.2%. Compare that to an average property tax rate of ~1.8% in NYC (before pied-a-terre).
Yeah thanks for nothing for comparing a single kind of tax to your country, whilst your country/states don't have the excessive overall tax regimes as are present in Europe.
Nothing, absolutely nothing do we have to adjust to America, neither up or downwards.
That being said, and as much as I think Mamdani is an Ideologue, taxing second, unoccupied homes sounds absolutely reasonable (at least if they aren't rented out). Expect all kinds of shenanigans to circumvent this, but still.
> In the UK, the equivalent tax on housing is council tax
Council tax is difficult to compare to a percentage based property tax - the band based system means people in super valuable homes pay virtually nothing, at least relative to the value of the property, and each of the ~8 bands pays a fixed fee - once in the max band the tax stays the same no matter how valuable the home.
This is especially acute in places like Scotland, where the top band kicks in at anything over 212,000 and hasn't been adjusted since 1991... Essentially any new build starter home in many places will automatically be in the top band and taxed the same as some dude who bought a castle for millions.
Personally I've never thought of council tax as a property tax, even if the bands superficially are linked to it- the link to underlying property values is so broken now.
My first rented flat outta college was taxed at the highest band, and I sure wasn't rich then. It's widely argued to be a very regressive form of taxation - its opponents indeed argue it should be replaced with an actual property tax.
> The rates sound a bit steep.
Agreed, but you also have to keep in mind that those people don't pay NYC income tax.
You missed a key detail: the NYC valuation system undervalues properties to the tune of around 10% of their actual market value. So your 6.5% tax is effectively aroubd a 0.65% tax against actual market value. That’s not bad (it’s a lot better than what I pay for my regular middle class home. Not in NYC, but I pay a bit shy of 2% annually)
Second homes (and beyond) should be taxed out of existence while people are still trying to find their first. This tax is not steep enough, but it's a start.
Taxing a pied-a-terre $40K/yr or more per year provides more resources for developing housing than simply evicting the owner and reclaiming the space. There aren't enough pied-a-terres to house the people who need housing. We need expensive premium housing to fund affordable housing at scale.
On unoccupied or secondary residences specifically, not on wealth overall. This is more of a housing policy?
It's a luxury tax that only affects people wealthy enough to have a second home in NYC. These people, by virtue of not living there, aren't paying income tax and thus don't contribute as much as someone who is.
>t's a luxury tax that only affects people wealthy enough to have a second home in NYC.
Not exclusively though, right?
Since they are revising the valuation system to not artificially depress valuations, isnt this a global tax increase? No rate changes or extra tax for someone with a primary residence but the base is increasing, right?
>While the tax seems large, experts say the city’s antiquated assessment and valuation system dramatically undervalues properties, reducing the burden. City valuations can often be 10% or less of the true market value, they said.
>Rather than overhaul the system immediately, the city will gradually update valuations – and the tax – according to the budget documents. Starting in the 2028-2029 tax year, the property values will be based on comparable sales. Since valuations will skyrocket, the tax rates will fall to compensate.
Those are two different things: the new tax, and fixing the broken appraisal process.
Its part of the same law. Regardless, the appraisal changes are global, right? That is, it would apply to a $200M 17th home and a $750k residence alike, right?
some states have homestead exemptions on property tax where your primary residence gets a discount on property taxes (eg Texas); is this effectively the same thing? or is NYC limited to unoccupied second homes instead of those being rented out?
It's a revenue policy. It's effectively a wealth tax, cleverly implemented largely within the existing tax regime.
Ken Griffin spend 183 days a year in Florida, so he pays no NY state or NYC income tax. He does pay ~1.8% income tax on his $238 million home though. Now he will pay significantly more. (His property is also assessed at a far lower number.)
Real estate cannot move. If you are wealthy enough to own a second home worth at least $1M or more, you are likely very wealthy (top 2% of US households by net worth threshold is ~$5.5 million). It is a wealth tax implemented on a real estate asset component of a high net worth human's total portfolio.
It affects wealth, but the owner can also sell the property to someone who'll live in it and then they won't be taxed despite owning expensive property. So it's more targeted than a general wealth tax would be and I think the intent is to free up housing supply a bit.
Yeah not really. It generates money for the city to run their programs without raising taxes on residents. Those properties aren't being purchased by anyone who can't already get a home.
I think the revenue is probably overstated in the long run as people will find a way to offload the properties except for a select few who will consider a cost of doing business.
Also a great marketing move by Mamdami in terms of walking his talk.
Or they can move to NY "full time", if I'm understanding correctly, which will likely also improve the city's tax revenue from more of that person's expenses incurring city taxes.
Wouldn't that mean that they would then also pay NY income tax?
Not just on their expenses - if they become resident in NYC, they'll own 4% NYC income tax (on top of the 10% NY state income tax).
I think it is unlikely anyone with a second home at these price levels is going to sell to avoid this (immaterial to them) tax. But certainly, if they do sell to someone who will occupy as primary residence, that's also a win, regardless of the coin flip (heads, wealth tax, tails, more housing for those who actively live in the city).
Edit: You start somewhere and keep tightening the policy ratchet as loopholes or other policy leakage are detected. You've found a clever hack? Congrats! The law is updated accordingly.
In reality, they will now just create a company in Singapore or Mongolia or another such place, which will then own the second home - while itself being owned by the original owner. Problem solved significantly cheaper than this new tax. In fact, I would not be surprised if they have already done that four months ago, when the law was being discussed.
The ones who will be hit are those who do not have the legal frameworks in place to erect such structures - Joe Homeowner who inherits grandmas city house, both worth slightly above the magic 7 figures.
> they will now just create a company in Singapore or Mongolia or another such place, which will then own the second home
How will that help to avoid a tax on secondary residences? Are they somehow going to claim that these properties are the primary residence of a company? Seems nonsensical.
Isn't that a good thing? It would encourage Joe Homeowner to sell the house to someone who could use it as a primary residence rather than leaving it empty and speculating on the real estate value.
Joe Homeowner already is incentivized to sell grandma's home. Homes need upkeep. No-one keeps an old home around to rot and fall down - that tends to bee bad for the evaluation. The issue is that those who can't finance a primary residence now won't be able to finance a primary residence then.
Why is this mythical "everyman" you've concocted for empathy points not selling a property he doesn't need that happens to be worth a "magic 7 figures"?
>Edit: You start somewhere and keep tightening the policy ratchet as loopholes or other policy leakage are detected. You've found a clever hack? Congrats! The law is updated accordingly.
God I hate this sort of armchair despot type thinking.
People are not stupid. They're only ok with the absurd attitude given to the government to tax and regulate insofar as it's mostly kept it out of the grubby mitts of those who'll abuse it.
Like yeah, you absolutely could strictly enforce the speed limit and use the clean water act to regulate people's lawns but if you did that someone would get elected on promises to depose you and change the law to prevent that in the future.
This is the same reason the NSA doesn't go around using zero days on movie pirates and the FBI doesn't go around bringing RICO charges on everyone who ever ran a scummy business. The power is more useful to have on hand to use surgically. If you abuse it you'll lose it.
The scope of my comment you cite is the usual "extremely wealthy people using loopholes to avoid taxes while burdening your average joe with them instead".
This is not "your math is slightly off and we're going to be punitive." This is defending against tax evasion strategies by those with the wealth and power to attempt them. If you don't believe in taxes, or don't believe the wealthy should have the majority of the burden, certainly, we will not find common ground.
My mental model is "You are very wealthy because you are very lucky. The cost to you for the societal socioeconomic system enabling this wealth is higher tax rates than those who work. Please pay your taxes due for a system that enabled your accumulation of wealth, and permission to keep it during your lifetime. If you attempt to evade the system, we will improve the system accordingly." One owes taxes on a lottery ticket, this is no different, just a different form of lottery ticket that paid out.
If you’re so smart, why aren’t you rich? Turns out it’s just chance. - https://www.technologyreview.com/2018/03/01/144958/if-youre-... - March 1st, 2018
Ref: arxiv.org/abs/1802.07068 : Talent vs. Luck: The Role of Randomness in Success and Failure https://arxiv.org/abs/1802.07068
Tax evasion by millionaires and billionaires tops $150 billion a year, says IRS chief - https://www.cnbc.com/2024/02/22/tax-evasion-by-wealthiest-am... - February 22nd, 2024
Panama Papers helps recover more than $1.2B around the world - https://www.icij.org/investigations/panama-papers/panama-pap... - April 3rd, 2019
https://en.wikipedia.org/wiki/Panama_Papers
https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...
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Read the fine article?
> While the tax seems large, experts say the city’s antiquated assessment and valuation system dramatically undervalues properties, reducing the burden. City valuations can often be 10% or less of the true market value, they said.
You have described an investment property, not an unoccupied second home exposed to the pied-a-terre tax, if you rent it out (whether mortgaged or free and clear).
What they also have described is a dacha.
Can't wait to see the middle-class families now moving into Billionaire's Row.
Considering inflation - the middle class will be the ones being taxed by this in a few years.
Sure yeah, all those middle class families with second homes in New York City. Right.
Nobody affected by this is middle class. Nobody that will be affected by this in the next 20 years would be considered middle class by any rational measure.
Just like the federal income tax was only targeted at the top 5% of the population when implemented.
Inflation is cumulative.
Are you saying inflation is going to cause me to acquire a second home in NYC somehow? I don't think you actually understand what you're arguing about, here.
So the numbers will need adjusted for inflation. Eventually. Like any other tax. If you're making an argument it is entirely unclear what your position is.
That really depends on how you define middle class. I can easily see how someone with a net worth of 100m being considered middle class compared to billionaires.
Thanks, I needed a laugh. Only on HN...
And here people gave Mitt Romney shit for saying $250k was middle class...
Not middle-class, middle-income.
Also, that was 14 years ago.
You didn’t read the article. This tax is for 2 years then as assessments are fixed it changes calculation.
Interesting system to compare here in Switzerland. They've never had a property tax. However they did have a tax where they calculate the putative rent you could get for your property and tax you on that income (that you don't really have). So basically a property tax.
But they just repealed that system so no more property tax but you can also no longer deduct mortgage interest from your taxes. So now the system favors people that don't have loans.
That with laws against foreigners buying property (most of Switzerland - not in some economically under devised areas though) the hope is the cost of housing will go down.
In the US land property taxes are essentially use taxes that pay for the maintenance of infrastructure that supports the property. This is why rural property taxes are very low -- there is no infrastructure that needs to be maintained that would justify the tax. Use taxes are broadly efficient.
If land property taxes were wealth taxes then you'd be able to deduct e.g. mortgage debt when applying the tax rate.
In this regard, property taxes in the US largely make sense.
Probably the least complicated tax law. Increase taxes to increase revenue. Makes sense. Align valuations with reality while maintaining relatively constant absolute tax dollar amounts. Also makes sense. It's really not that hard.
>Probably the least complicated tax law. Increase taxes to increase revenue. Makes sense.
Not so fast.
1) It is complicated. It has progressives rates that start out higher for 2 years then decreases but coincides with how the base is calculated.
2) The budget projections assumes no behavioral changes from the taxed residents. This doesn't seem like a safe assumption. You should at least assume some amount of the tax base leaves since it disincentives 2nd properties.
This doesnt mean its a bad plan. But it's definitely not the least complicated tax law. I'd say thats more like sales tax or something.
It's a good thing to try, we'll see what happens. It's interesting to see the CEO immediately threatened to pull jobs and move them to Miami. That's to be expected to some degree. The way it works that sometime a small hike is enough to trigger the behavior. It could be in protest or as a sign of more tax hikes to come.
This is also some opportunity for intra-state and intra-city arbitrage where random cities and states lean into the controversy and start offering tax incentives for the "sad" and "offended" egos of wealthy of NYC to move there. That often happens to companies, where states, sometimes down South offer such "deals" to move company headquarters from higher tax states up North.
But at the same time, this might encourage some wealthy people who "fled" to Florida to return back and make New York their primary residence.
I also see slew of loopholes popping up, couples divorcing so each can claim on of the residences as "primary"
What's to stop them from selling to a holding company so that it's not literally his own second house?
https://comptroller.nyc.gov/reports/the-pied-a-terre-tax-and...
> It is unclear how DOF will treat properties owned by LLCs and trusts. In general, these owners are not considered residents. However, this does not mean that the properties are not used as primary residences. For instance, based on publicly available information, Mayor Bloomberg established his primary residence in two adjacent buildings on the Upper East Side, one owned by an LLC, and the other a cooperative apartment corporation. It may be possible for some LLC owners to rent to themselves and avoid the tax.
Now remember they are changing how property values are assessed. So everyone's base rises and the rich with 2nd homes dont pay the extra tax because they move it into an LLC.
> the rich with 2nd homes dont pay the extra tax because they move it into an LLC
Sounds like something worth addressing as a second phase!
The tax is based on residency, not ownership. If nobody lives there as their primary residence, it's subject to the tax.
That's a great point. I'm guessing the politicians knew the rich would find a work around, but they're obligated to go through the outward motions so they can claim to keep their promises.
>While the tax seems large, experts say the city’s antiquated assessment and valuation system dramatically undervalues properties, reducing the burden. City valuations can often be 10% or less of the true market value, they said.
>Rather than overhaul the system immediately, the city will gradually update valuations – and the tax – according to the budget documents. Starting in the 2028-2029 tax year, the property values will be based on comparable sales. Since valuations will skyrocket, the tax rates will fall to compensate.
Hold on a second. Reading between the lines, this means everyone's property taxes are going up, right? Because the valuation system is being revised to more accurately reflect resale value.
Obviously this would affect more expensive properties more. But I havent seen anyone acknowledge that everyone's taxes will increase. Is that because I have the details wrong or because it's just flying under the radar?
"everyone's taxes will increase" is not true because lot of newer apartments don't get the chance to undervalue.
New apartments? NYC?
I jest.
Im not sure you understand what Im saying though. Wouldnt normal people's taxes go up because the appraisal changes are global? Say, a primary residence bought for $750k.
> Wouldnt normal people's taxes go up because the appraisal changes are global?
No. Our town finally reassessed everyone after not doing it since before COVID. Assessments doubled and everyone freaked out, but the tax levy didn't change, so the amount of actual tax basically didn't change; $160M in taxes for 20k people is still $160M in taxes for 20k people. People just now pay less tax per $1k house value, but for higher house values.
no, you're right.
it's flying under the radar because people don't read these things and critically think about them.
as per usual, the middle class will take the hit. the people that voted for this will become poorer, and the wealthy will go on as normal.
Interesting. A $3m house is often valued at $300k so this is actually narrower than one would think. https://www.zillow.com/homedetails/62-Beach-St-APT-2F-New-Yo...
Wild that there are so many rich people in NYC. Truly an engine of wealth creation.
>“All my clients already feel like they pay too much,” Pollack said. “These numbers are significant. I don’t care how wealthy you are.”
If that argument holds up in court, we are all screwed.
I'm really curious about this. Wont, as a rule, any super-rich 2nd, 3rd, and 4th homes in New York be completely unaffordable for almost everyone? It feels a bit like you're potentially spreading around the super-luxury homes across a wider breadth of the super-rich, but not much else.
Is there a better way to think about this?
If you can afford to pay $238 million for an apartment (the Ken Griffin example from the story) you can afford the annual $1.87 million in tax. That's about 0.785% tax rate.
By comparison, I have an investment property that's worth about $285k, and I pay 1.97% (about $5,800) on that in annual property tax, so esp. considering he's in Manhattan, that rate looks like a bargain.
Yes. A tax on the ultra-wealthy, rather than a measure aimed at increasing housing.
Its very roundabout as NYC can only make taxes for NYC, but the net aim is to increase the effective tax rate for the ultra-wealthy, using secondary property as a proxy for that.
Edit: AND WE (I) LIKE THIS because progressive taxation is the core play of fixing income/wealth inequality
> Wont, as a rule, any super-rich 2nd, 3rd, and 4th homes in New York be completely unaffordable for almost everyone?
??
The point is to raise revenue.
In some sense, City is calling the bluff of these deeply immoral rich fucks; the tax is incredibly affordable for them, and almost all of them will simply complain and pay it, and thus generate revenue for the City.
> these deeply immoral rich fucks
If that is your starting point, I don't think you're going to approach tax policy rationally.
Ken Griffin may be deeply immoral -- I don't know -- but it's not a condition of being rich.
>?? >The point is to raise revenue.
Yep, I'm sorry -- I was very confused here, sorry for the not-very-useful initial post.
Well it's two-pronged right? They either keep their extra houses and pay the tax, which increases tax revenue which can be used to fund things like constructing housing in NY, or they sell them off. The people potentially buying these houses will be more hesitant themselves to buy, so they're forced to lower the sell prices, making the houses more available to the general public.
I guess three-pronged, cause it says if they turn it into a rental that it's exempt from the taxes, which means someone is still at least living in it rather than just being used as a speculative asset.
For startets, the revenue raised makes NYC as a city more sustainable by funding social programs for the normal people who keep the lights on.
Thanks, I feel sort of stupid for failing to notice that it would if nothing else just increase tax revenue. I was stuck in a perspective that this was about increasing housing stock.
Yeah Mamdani is firing on all fronts.
There is plan to add to the housing stock as well: https://www.nyc.gov/mayors-office/news/2026/05/mayor-mamdani...
He is also aggressively going after landlords withholding repairs, maintaining dilapidated units, etc. and thus tackling the quality of the housing stock problem.
That's because he's planning to fail upwards. None of his plans will result in positive outcomes but they'll look good on paper.
So he'll move to a higher office and leave his messes for the next sucker.
This is really more about raising revenue for the city than increasing the housing supply.
It's for generating more tax revenue.
Economics always applies at the margins. If this means that no one can afford $500 million homes anymore, then builders will stop building them, and start building slightly cheaper homes. That will increase the supply of the slightly cheaper homes, so they will have to become cheaper, thus putting pressure on the even cheaper homes. Eventually, if other friction isn't too great (which is not given) the downward price pressure and increased supply should reach the regular person market.
If this has a problem, it's the difficulty of application: 2nd homes, and only if you have X amount of money, instead of just a flat increase. Property taxes (or really, in NYC land taxes, as most of the property tax is really the value of the land) are just very efficient, and make much less of a difference on the price of rents than you'd think.
Unfortunately, doing that is very unpopular. Unpopular enough that we see states trying to get rid of property taxes, and those providing limits to increases, which basically guarantee misallocation and rising prices. But what is economically reasonable and what the voters like have very little to do with each other.
I think this is in the right direction, but the cut off at $1M is interesting.
Why's there an obsession with the $1m cutoff?
The dollar has been turned to dust. $1M is not that much money, especially in housing, especially in NYC.
Why tax $1m second homes and not second homes generally? Effectively, you're going to tax almost all second homes.
So why the arbitrary cutoff?
Chicago wanted to add a "millionaire's tax" on $1m+ home sales. At least in Chicago, that isn't effectively taxing the vast majority of housing (and total value) - so there's some distinction worth having.
Read the fine article?
> While the tax seems large, experts say the city’s antiquated assessment and valuation system dramatically undervalues properties, reducing the burden. City valuations can often be 10% or less of the true market value, they said.
As TFA states, in NYC the assessed value of a home and the market value of a home are wildly different, with the assessed value being much, much lower.
This is $1mil in assessed value which would translate to roughly $5mil in market value.
In NYC $1mil market value is pretty much the starting price for a 1-bedroom condo in a gentrified area. $5mil market value, on the other hand, is a pretty luxurious place.
Below 1M in NYC it becomes unclear why you have a second home. Maybe you're not quite "wealthy" and it's really helping your family out in some way. No reason to complicate things, the cutoff actually simplifies it while sacrificing almost nothing in terms of what the tax is trying to accomplish.
It's symbolic for it's demographic voters
what does it symbolize?
"going after the rich", yeah? millionaire is still generally understood as an economic class by voters.
>Why's there an obsession with the $1m cutoff?
I think this is because the term "millionaire" is a catchy term. And that caught on in the 1800s.
I agree and I’d prefer to see apartments excluded from this. Apartments are what I want second-homeowners to own rather than hoarding valuable land.
> The bill exempts the following categories:
> The primary residence of at least one owner.
> The primary residence of a parent or child of at least one owner.
> Cooperative and condominium units that are appraised at less than $5 million in the previous three years.
> Properties and dwelling units that are rented to a NYC primary resident.
(https://comptroller.nyc.gov/reports/the-pied-a-terre-tax-and...)
Wouldn't excluding apartments therefore exclude Ken Griffin's 238 million dollar penthouse? That seems like exactly the kind of 2nd home that this should be targeting.
NYC is filled with apartments dedicated to the wealthy with token poor-doors for access to a few mandatory low income units in each building. All housing has to be subject to taxation for this to work.
1 million remains the hallmark of 'wealthy' (as in: not us), to the point where pop culture has started mocking the concept decades ago (See: That Austin Powers movie...)
Hardly everyone understands 'owning a house' as millionaire-level wealth. Which is why people cheer the policy on until they realize it is them who is being shaken down.
Sure, but it's only a shakedown if it's an unoccupied second home, which is hard to have sympathy for. It can easily be an occupied second home (family, renters) or a first home for those in the upper middle class paying for $1mm+ apartments in NYC. I'm not really worried about Jeff Bezos or some Hollywood actor's crash pad when they have business in nyc.
In what world is 1 million US not wealthy? Have tech salaries distorted people's opinions that much?
Owning a house where your equity in it is over a million is absolutely wealthy.
> In what world is 1 million US not wealthy?
In the US itself (?) lol
I disagree with the comment and entire existence of the person to whom you are replying, but they aren't wrong about $1m actually not being as big or watershed a number as it used to be.
A basic middle-class house in just about any part of the country that's worth living in is going to be $1m, plus or minus 200k.
> A basic middle-class house in just about any part of the country that's worth living in is going to be $1m, plus or minus 200k.
Help me understand your comment. Do you think the country is only made up of like, 3 big coastal cities? Do you think the only houses worth living in are several thousand square feet in only the coolest parts of town? I want to understand what you think the country actually looks like, here.
You quoted the part that clarifies this: "worth living in"
Subjective, obviously. My view is that I wouldn't live almost anywhere outside of one of the major coastal cities in a blue state. Certainly nowhere in "flyover country".
Even disregarding the fact that your description here still doesn't meet the $1M bar you set in the original comment, you are using the general term "worth living in" to describe places you would live, which is way more elitist than is typical of HN.
I too would only live in a small subset of the country (a different, but not opposite, subset from you). But I would never do something as petty as describe those places as "the only places worth living."
"that's worth living" is doing some Herculean lifting there. I'm sorry to inform you that only the wealthy can live in the places you deem "worth living". You are not using the phrase "middle-class" correctly.
I'm not coming at this from a rural perspective. I live in the greater NYC area. I have friends in NYC. They make a lot of money and live very close to Grand Central, and even they don't live in $1M properties.
I will generally concede to you, sure lol
I have lived in both NYC and Southern California, and I was mostly thinking about SoCal, where in general one assumes a basic middle-class house in a reasonably decent area is going to cost $1m. Do they always? Not necessarily, but even fairly modest houses like my parents house now exceed $1m in value easily.
Out of curiosity, do your friends own condos? Doesn't even a studio condo on the UES cost at least like $600k base (i.e. not counting any fees related to the sale, nor any ongoing HOA)?
> Owning a house where your equity in it is over a million is absolutely wealthy.
Only ~30% of home owners own their outright.
~60% own 40% of the house or less.
I'd argue that you can't own more than ~92% of a home, because it costs a lot to sell a house...
The "average" homeowner moves every ~7 years in the US, and this is heavily skewed to people with less equity - the people who outright own typically have stayed put 20+ years.
So "owning" a million dollar home means anything from: you put 3.5% down, and you're currently underwater cause prices went down in a lot of the US (i.e. you are literally own NEGATIVE equity)... to you actually have $1m in equity.
I "own" a $1.2m home. I really only own about $425k of it. If I had to sell it, that typically costs close to 9% - so I'd be lucky to get $300k.
The person underwater who put 3.5% down on a home could easily have -$250k if they had to sell... So the idea that everyone who "owns" a $1m house is "rich" is a bit strange...
I mean, in general, people who "own" $1m houses are not destitutely poor, but that's about as far as you can extrapolate.
I agree that owning an expensive house where you have negative equity is not wealthy (at least based on that data point itself; maybe you have a 401k or something else that makes you wealthy)
Almost nobody casually owns a second home in New York worth $1m or more. What a dumb comment (like pretty much every comment criticizing this tax--just stupid and immoral).
You are confusing owning a house with having paid off a mortgage. I can go get a mortgage for $1 million tomorrow, but that does not make me a millionaire. It makes me an debtor with a house I can't afford.
Most Americans cannot get a mortgage for $1M.
Yes, that’s more to the point.
Ummmm.... It depends where you live.
You can put 3.5% down for a $1m house in places where ~50% of the population lives.
At current interest rates, no, you can't qualify, but at interest rates where people bought most of these houses... Yes, the median person could afford it (in those areas).
They would probably be better off fixing how they asses the value of condos. Which, AIUI (and one have a good explanation?) is based on imputed rent, capped at the rent of the closest example they can find. So no condos get taxed more then the most expensive rental (I could have this wrong).
TFA makes clear that addressing this is part of the phased implementation.
I can’t tell if it will apply generally or just vacation homes. It says “gradually”, but that seem to be about the rates, it the scope.
And it does not explain how the current system arrives at such low valuations.
This is fantastic news for the Miami real estate market. Does anybody has stats as to how many homes this would actually affect?
The targets of this tax already live in Miami, which they declare as their "primary" residence to avoid paying NYC taxes
Boston hasn't seen the doomers' hypothesized capital flight from their wealth tax. The opposite, in fact.
https://www.bostonglobe.com/2026/05/25/metro/millionaires-ta...
Now picture NYC, symbolic of wealth and power. Owning property there is a great way to show off.
This tax may make it more attractive to own a second home there, because it proves you're not one of the fake-wealthy who can't afford the price.
Miami? Have you checked home insurance rates lately? The thought of these NYC second home owners getting gutted by the next hurricane is rather amusing though.
The rich don't really care about insurance rates down here because they can a) pay them, b) tend to gravitate towards newer buildings that have better protection and c) have the money to retrofit older buildings with the necessary protection to lower insurance rates. Miami has the strictest hurricane codes in the country, so while there's a possibility that they may get gutted, it's probably going to be less than people expect.
I live in FL so if you have questions about insurance feel free to ask.
But the people who can easily afford the insurance in Florida can afford the new tax as well. And as an added bonus, they don't have to live in Florida!
But in all seriousness, they all already own homes in Florida.
So they can pay the higher insurance without a thought, they can pay for the relocation across the country, but they're unwilling to finance public services for the city they live in.
This seems like a no-brainer. Tax 10-15k ultra wealthy people who park their cash in second homes in exchange for ~$500M/year in revenue.
I support this. The purpose of a home is for people who live in the area to live in, not to be a speculative investment.
This is part of the reason we have a housing shortage in the US: 20% of available homes are purchased by investors, which squeezes the supply.
Airbnb has made this worse. There are areas near me where during the COVID ZIRP, people snatched up like 70% of the homes to turn into rentals. Those places are now ghost towns, unless it's Memorial Day weekend.
Essentially the whole problem with housing prices in the US is failure to build housing, largely forced through restrictions on building housing, including restrictive zoning.
“Some of the supply of housing that is permitted to exist is used a short-term rentals rather than as actual housing” may be “part” of the problem, but its a vanishingly small part, in that if you deal with the basic building problem, there would be no actual problem, even if the short-term rental thing continued.
For all the fear-mongering the media-zeitgeist tried to stir up about Mamdani's NYC mayoral campaign, I find his policies measured and fiscally responsible. A second mansion in NYC does seem excessive, and the tax could free up supply. The tax rate isn't outrageously high, if I'm wealthy enough, I'll just pay it, otherwise if I'm on the cusp, maybe it's better to sell and liquidate. Feels like a Keynesian policy at its finest.
Why tax the middle class within $1m-$5m. The tax should only apply to upwards of $10m. This is wrong.
How many middle class folks do you know who own two homes, the unoccupied one of which is a NYC property worth >$1 million?
I'd agree with you if this applied to primary residences, but it seems like this only applies to secondary residences? I find it hard to reconcile "middle class" with "has a second home in NYC"
It’s a pretty moderate tax on second homes and it makes the city cash flow healthier. I don’t understand what’s controversial about this.
It's not on the primary residence. Relax.
The middle class doesn't own second homes. This tax does not apply to primary homes.
the amount of people who are middle class with a second home is rare. if you can afford another dwelling, you can pay more tax on it. lets not be this disconnected.
Dumb question - what about corporations (or charities?) that own homes? Are they automatically "second homes", since a corporation has no primary residence?
Are we going to see things classified as not-residences, but then people can vacation there anyway, much like Mar-a-Lago supposedly cannot be a residence, but apparently President Trump lives there and votes there, anyway?
As I understand it many of the very wealthy do not "own" properties directly but control LLCs that do. The chain of trust/LLC ownership can be complex. Also as I understand it, this legislation does not really answer that call effectively -- though I have, of course, not read the full legal text myself.
I suppose in Ken Griffin's case, even if his residence is owned by an LLC he controls, he is known to reside in it. But how effective is this legislation when the purpose of LLC ownership is expressly anonymity and accounting convenience?
If you want to tax the ultra-wealthy, prevent Securities-Based Loan (SBL) or a Securities-Based Line of Credit (SBLOC). Honestly this is how EVERY SINGLE wealthy person gets around paying taxes.
Stocks should be bought and sold, period the end. That is how the market is supported to work.
If you closed this simple loophole, you would see a massive amount of tax revenue.
The wealthy are very easy to tax. They possess a lot of assets. Really, all of them should be taxed progressively, like shooting fish in a barrel.
Flagged misleading editorialized title.
Actual title is "New York passes Mamdani’s pied-a-terre tax"
$ have to come from somewhere, with the Fed cutting taxes for the rich and benefits for the poor every other term, time for the states to take over.
Issue is not revenue, it's spending. Florida has 2x the population, yet half the spending on NY.
Spending is not necessarily an issue and can be a net benefit for the taxpayers depending on where you spend that money.
Thinking stuff like healthcare, education, housing, public transport, cycling infrastructures or even law enforcement.
The Fed (with a capital F) refers to the Federal Reserve which explicitly does not control tax policy.
“It always seems impossible until it's done."
Actual title from the article:
> New York passes Mamdani’s pied-a-terre tax. Here’s who pays and how much
(The submitted title at time of commenting is "New York Passes Tax on the Ultra-Wealthy)
It's a tax on second homes. If you thought it was a wealth tax from the editorialized title, like I did, that's not correct.
Tax on wealthy vs. wealth tax.
Surpriosingly sane idea suddenly
Curtailing spending is impossible. Just keep raising taxes!
New York desperately wants all the people with money to leave the state.
This argument is used again and again and I wonder: Why do "people with money" stay where they are when there are countries, islands, even just states where there is less taxes to pay?
> This argument is used again and again and I wonder: Why do "people with money" stay where they are when there are countries, islands, even just states where there is less taxes to pay?
Like others said in the comments here: there's a balance of how much money you have to pay as tax until you move to other places. New York is taxing people on top of whatever other taxes are there just because they have money.
My issue is that if people earned the money fair and square, they shouldn't be taxed because they were successful. And this is what this tax does: oh, you afford to buy a 10M home, here's an X% annual tax just because.
Person with money and former NYC'er here. I didn't stay. I moved to a state with less taxes to pay. I haven't looked back.
I ran a company in NYC for six years before the taxes and onerous regulatory environment convinced me to bail.
The final straw was when we had to hire a fixer to clear up a state regulatory error that would’ve destroyed our business. No amount of calls or letters over months — by me — fixed the issue. The guy we hired got it cleared up in a week.
That’s how I learned firsthand that the more involved the state tries to be in protecting everyone from everything, the more opportunity there is for bad actors and gross inefficiency, and the worse things get.
It's not the "people with money" leaving. There's equal evidence of people with money staying and people with money leaving.
It's people who use their money to generate more value and employ lots of people that are, consistently, leaving. That means that thousands of jobs for the lower middle class are leaving and going to somewhere with a more favorable business environment.
And that's not good (well, it's good for the other city).
It's easy for people in tech hub cities to think that's never going to change but history shows boom towns going bust repeatedly. Sometimes they come back (Seattle). Sometimes they don't (the whole Rust Belt + Upstate NY).
And once the talent pool from a few large companies moves to another metro, whole industries relocate their offices to chase it.
Are Seattle, the Rust Belt, and upstate NY examples of higher taxes driving wealthy job-creators out? I think they were the opposite: the market moved and then the wealthy people left to follow it.
NYC has always been extremely expensive, and people have largely decided that it's worth the price. I don't see how a little wobble in either direction changes that. Everyone could have already moved to Miami, or Salt Lake City, or even cheaper places if they were actually price-sensitive.
A "little wobble" may not change it more than a "little", but enough "little wobbles" over time become a "big wobble" that may change it in a "big" way. The right question to ask is: what's the elasticity? So far the elasticity of domestic migration to tax increases has been smaller than many expected due to network effects and inertia, but nevertheless if you look at the population growth rates of high tax states like CA and NY and compare it to low tax states like FL and TX, you will definitely see a pattern. Rational people think on the margin. Perhaps only a few people will move if you increase tax rates by 0.1%, but more on average will decide to move than if you hadn't raised taxes - the question really is, how many?
This specifically targets people who don't live in New York though (and thus don't pay income tax).
If I tax you one cent would you budge? This is what this tax amounts to the ultra wealthy.
> This is what this tax amounts to the ultra wealthy.
Because you would know what the ultra wealthy think ?
Bots can't think.
Real Estate can't move out of New York. Someone else would have to buy it.
Wealth follows an extreme power law. This tax is pennies to those who will pay it.
I think there is a real argument here that everyone will love to yell at you. Same thing happened with California. Its always a balance -- if the tax is too much people will leave, if they get the number just right in that its a nuisance and not material they will stay.
Though when you start engaging with the bots they can't handle the nuance.
Sounds like a great way to lower housing costs.