No, they aren’t adding a tax on your metrocard purchase. They are increasing the taxes involved in high-value real estate transactions and, allegedly, using the proceeds to fix my favorite broken train system #klenksvstheMTA. I’m always skeptical that money will go where it’s supposed to (like when you donate to your college and earmark it for Women’s Studies but it probably goes to the football team), but if this does happen, it will make me feel a bit better about why the tax exists. Robin Hood, etc.
Because things move quickly in real estate, something I wrote about recently is already irrelevant: the pied-a-terre tax. Basically, the pied-a-terre idea was shot down because it would “discourage rich people from buying second homes in NYC, which would lower overall tax revenue more than the amount the new tax would raise. So now they’ve decided to do something that hurts people whose primary residences are in NYC, which is…frustrating.
So what exactly are these taxes, and how do they affect sellers (since it’s sellers’ month)? There are two additions, one that affects sellers directly and one that affects them indirectly.
We already went over this, and the 1% mansion tax on purchases over $1 million still exists. They have now added incremental 0.25% increases at 2 million, 3 million, 5 million, etc (see breakdown below). This is paid by the buyer, not the seller, but it does affect sellers. Any additional tax will impact how frequently apartments trade, pricing if the place is on the border of an increased tax, and make it harder for buyers to acquire these apartments (making them harder to sell). It won’t DESTROY the real estate industry, but it’s not something we need right now.
Except for in new development, where the buyer pays transfer taxes, these are handled by the seller. For residential real estate transactions below $3 million, the transfer tax remains 0.4%. But now, on purchases of $3 million or more, the tax jumps to 0.65%.
As a seller, you are obviously getting the proceeds from your sale which will cover this tax cost. But between commission (which you need to pay to your agent for reasons to be explained in a later post) and legal fees and now, potentially, an additional tax, margins will be a bit slimmer. Again, this won’t bankrupt anyone or destroy real estate in NYC as we know it, but it will have a negative impact because anything that impedes the trading of apartments causes the market to slow. But if you’re not at the $3 million mark you can finally feel HAPPY about it!
I go back and forth with my feelings on this, because I do think that although $1 million is NOT a mansion in NYC and I think that threshold is foolish, I do understand why the state would want to add more taxes to high-end transactions or pied-a-terre purchases (the second one would have been a better idea, though). And I’m not someone who thinks of the word “tax” as inherently bad, so long as the proceeds go to something that helps those paying it. Which brings me to the thing that DOES piss me off about the whole situation: we pay taxes (not these taxes, but federal taxes) that help pay for resources in other, lower tax states full of people who claim to hate NYC. I’ll let our Chief Evangelist speak for me for a second:
New Yorkers have been recently accused of being SOCIALISTS, and yes there are some politicians and citizens among us who preach extreme left-wing rhetoric. I disagree with all extremists: they are the curse of society. But in my opinion, the ultimate irony is that New Yorkers are actually being used in a massive SCAM, that is possibly the very definition of Socialism. Except that this policy is perpetuated by the Federal Government, a Republican White House, and a Republican Senate all of whom decry the evils of Socialism daily…There are about 19.54 million people in New York - just under 6% of the total US population - yet New Yorkers contribute about 9.4% of all federal income taxes, around $150 billion per year. Highly productive socialists? It gets worse: For every dollar New Yorkers contribute to the Federal Coffers, 10-15 cents are siphoned off and re-distributed to other less wealthy states. Surely this is called WEALTH RE-DISTRIBUTION….or SOCIALISM??? Today Albany announced new tax increases and they could have been prevented - a tax LOWERING policy could have been implemented instead - if these socialist-style re-distributed dollars came back to New York State. So for every hypocrite accusing New Yorkers of SOCIALISM, I urge you to send our Federal tax money back without further delay. I am neither Republican nor Democrat. It’s time for PRAGMATIC, Centrist, sensible and honest politicians who are not self serving hypocrites. Compassionate Capitalism is possible. We deserve better.
I get mad just thinking about how frustratingly hypocritical the whole thing is, so I’m going to stop it here.
But I guess the New York value here is that despite all the flack we get from people who call us heathens or too liberal, it’s OUR money that funds the very states that don’t have income-producing cities and industry, voted for Trump, and complain about having to pay any taxes at all. Ohhh the irony. But I know that would be lost on anyone who should feel embarrassed by it. So we can just know that our taxes are higher than they should be in order to make life easier for the same people who hate us. Classic! #letsgetridoftheelectoralcollege