The proposed pied-a-terre tax, which would be paid annually and affect second (or third or tenth) homes worth roughly $5m or more, is a rare thing that put everyone else is in a tizzy while I really have no strong feelings one way or the other.
I see the arguments on both sides, but mainly I think it's part of a greater conversation about structural inequality, what is owed by people who have benefited greatly from the pandemic at the (direct or indirect) expense of others, and what happens when states are able to compete for residents by undercutting one another on cost of living/doing business and taxes.
The thing I do feel strongly about? That misleading press and grandstanding needs to stop. Do not tell me that this tax impacts "middle class" New Yorkers or that it will somehow magically close the budget deficit. Neither is true.
But again, it's a conversation, and the more open -- and honest -- discussion we can have, the more likely we are to find well thought out, useful solutions.
xo
Anna
What's the Deal?
The pied-a-terre tax, which was introduced back in 2019 but has recently picked up support, would be an annual tax on homes in NYC with an assessed value of $300,000 or more (roughly $5m market value) that are not the owners' primary residence and are not being rented out or otherwise occupied by the owner's family, instead sitting vacant for the owners' occasional use.
How much would it actually cost these owners? I'm going to quote attorney Andrew Luftig here rather than do my own math:
Property Listed for $7 million (market value) with an assessed value of $672,306 -
$672,306 (assessed value) MINUS $300,000 (pied-a-terre tax doesn’t apply to 1st $300,000) = 372,000 * 10% (proposed tax %)
= $37,200 a year assuming the legislation implements the proposed tax in its current form.
Of course, it would be complicated because the city would be tasked with figuring out veteran/senior/disability exemptions, whether someone is using/renting the property enough for it to be considered, etc. It's also become a talking point because of the recent blue wave in Albany and the upcoming mayoral race.
In the "for" corner: New York City is facing a $5.25billion budget shortfall; people who own second homes here do not pay for services they use (police/fire/roads/garbage/etc); these homes are vacant for most of the year while over a hundred thousand New Yorkers, including many children, are homeless; these people made money during the crisis while other New Yorkers stood in hours-long food lines.
Representing the "against" side: high-income New Yorkers already pay more than their fair share (although this tax would be levied against a different group of high-earners); it would decrease price on luxury real estate and potentially hurt long-term NY tax revenue; the estimated annual revenue from the tax is far lower than initially stated ($232m annually down from $390m); this is more political spectacle than useful policy.
As I see it? Everyone's kind of right. To some extent all of these things are true. And I think this is why I don't have a strong opinion on the matter.
One other thing I'll add: To anyone who fears that these people selling their homes would cost NYC tax revenue, I'd argue that, in the short term, the sales of these units could actually benefit the state in the form of transfer taxes. Collecting roughly 2% of every sale would get us way closer to fixing the current deficit than a meager annual tax would. There's also little proof that they would actually bail on NYC rather than pay a few extra grand every month.
Why Does This Matter?
Again, because it's part of a larger conversation and debate around wealth disparity, equity, and "building back better."
We really f*cked up the stimulus because at the time the government was run by garbage monsters (technical term) who still champion trickle-down economics, a model popularized by the Koch brothers, who actually funded business schools to legitimize this laughable, repeatedly proven wrong concept.
BUT I DIGRESS.
Look, as someone who grew up in Appalachia and has spent eight years living in Harlem, I'm no stranger to the impacts of poverty on communities, whether they're white or people of color. And over my lifetime I have watched the inequality/poverty get worse, especially during the decade-of-a-year that was 2020. We need to do something about it, because this level of inequality is not sustainable. Spend 5 minutes on Gen Z eat-the-rich TikTok and you'll see the ramifications of ignoring the problem.
So yes, I do think that some people who believe they pulled themselves up by their bootstraps will end up needing to pay more than what they feel is fair. But I'm also not sure that adding this tax will be helpful. Why fuel the narrative that NYC unfairly taxes wealthy residents over a very minimal revenue increase? Seems....bad. Everyone needs to put their egos aside and think, logically and honestly, about what makes the most sense.
Further Reading/Watching
For more, please check out the links below.
Brick Underground - What is assessed value and how is it used to calculate a pied-à-terre tax? (article)
The Real Deal - Pied-à-terre tax revenue estimate slashed by 41% (article)