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In the News: Pied a terre tax + the MTA
Two downtown state legislators — Deborah Glick and Brad Hoylman — have been pushing for years for state legislation that would impose at .5 to 4 percent tax on pied-a-terres (pieds-a-terre? Where’s William Safire when you need him.*) worth more than $5 million. The idea is to gain the lost revenue from owners who do not pay state or local taxes. And now Crain’s is saying the governor’s budget director is seeing this as a way to bring in $9 billion that could go to fix the MTA:
Mujica argued the state could raise $15 billion for the MTA by charging autos for entering the Manhattan business district, $5 billion from a sales tax on online purchases and $2 billion from imposts on legalized recreational marijuana. The remaining options, he argued, are wringing half the remaining $18 billion from city tax revenues or from rich out-of-towners who maintain a home in New York.
So…get to it.
As my former colleague (and idol) on CB4 explained it to me, the New York housing market is inelastic — it stretches and stretches and never bounces back thanks to investments like these. There’s a catch, but only if you are a New Yorker who owns TWO $5 million apartments.
Margaret Chin is also asking the City Council to send a reso to the state supporting the legislation: “Those who buy multi-million dollar properties in the city and keep them empty for investment purposes or turn them into scarcely used vacation homes need to pay their fair share for our subways, schools and roads,” said Chin. “With more and more New Yorkers struggling to find an affordable apartment, we need State action to hold these absentee property owners accountable.”
Glick and Hoylman have been tossing this idea into the wind for five years, but it has finally gotten traction (mixed metaphor alert) with a Democratic controlled state legislature AND the sale of the penthouse on Central Park South to Kenneth Griffin for $238 million.
The Times put it this way:
The record purchase — surpassing the cost of the next most expensive home in the United States by more than $100 million — was a stark reminder that when wealthy buyers like Mr. Griffin purchase expensive apartments as second homes or investments, New York City and the state get less financial benefits. If the buyers live out of state, they are not subject to state or city income taxes, and do not pay New York sales tax while outside the state. A pied-à-terre tax would institute a yearly tax on homes worth $5 million or more, and would apply to homes that do not serve as the buyer’s primary residence.
And the wonkier analysis from City & State from this past summer:
Part-time residents do not pay local income taxes. They don’t pay sales taxes when they aren’t in town. Many of the new buildings benefit from huge tax abatements and ultra-luxury condos and co-ops are vastly under-assessed by the city’s byzantine property tax system. CityLab summarized the situation accurately in 2015, when it wrote, “The values of these new condos are being assessed at just a fraction of what they’re worth. And buyers are paying only a fraction of that fraction in property taxes.” So these super-rich property owners contribute vastly less than their fair share to the cost of government services, like the parks, mass transit, sanitation and public safety that make New York a desirable place to live – and that are essential to the escalating value of their investments.
And CNBC sort of outlines the opposition, in an analysis from 2014, when the bill was first introduced.
*Had to link to this obit, since it is written by the best rewrite man of all time about one of the best wordsmiths of all time.
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This story shows how our ridiculous, economically illiterate, beholden, and captive-to-special-interests, politicians want to contort their way out of a problem of their own creation.
“Many of the new buildings benefit from huge tax abatements and ultra-luxury condos and co-ops are vastly under-assessed by the city’s byzantine property tax system.”
The City and State politicians are responsible for creating these distortions. They use them to get the support of the construction unions, who benefit from the jobs created by using your tax dollars to create incentives for building the high-end condos the politicians then decry from the other sides of their mouths.
Why don’t these hacks reform the City property tax system (with State consent) directly instead of this roundabout, corrupt way of giving and taking back subsidies to the construction industry in the form of abatements and taxes on condo buyers?
Why doesn’t the system give disproportionate tax breaks for building affordable housing? Ask the politicians, construction unions, and developers why.
And Margaret Chin makes no sense:
1.) If someone rarely or never uses their NYC home, then by definition they rarely ride “our subways” send no children to “our schools” or drive on “our roads.” Arguably anything they pay for zero use is more than their “fair share,” unless by “fair share,” you mean an incident tax and not a usage (excise) tax.
She’s AWOL on these issues when they affect her constituents:
2.) Does Chin support congestion pricing, which is an attempt to get people, like the outbound trucks and commuters that rumble across Broome Street and Canal Street every evening toll-free, to pay their “fair share” for our roads? Where’s her leadership on this?
3.) How about the municipal parking placard abusers who do not part their fair share (or even income tax on the value of the parking benefit)? Where’s Chin on that?
She goes on to say, “With more and more New Yorkers struggling to find an affordable apartment, we need State action to hold these absentee property owners accountable.”
4.) Accountable for what? That the politicians choose to give unnecessary incentives and tax abatements for building luxury housing in Manhattan instead of for affordable housing in “opportunity zones” and parts of NYC where land is more affordable? That the politicians choose to starve mass transit rather than fund it and expand it to encourage development in and commuting from underused parts of the city?
*Income* tax, not incident tax
Actually, James, CM Chin does support congestion pricing, consistently and strongly, and with none of the b.s. about resident discounts or exemptions that, politically, would strangle its political chances. And she has been similarly outspoken on placard abuse for years.
So please don’t blame her that c.p. is still facing a tough vote in Albany at the end of the month. Direct your ire instead at downtown Assemblywomen Niou and Glick, who have been lukewarm at best. And on placard abuse, aim your frustration and anger — which I share — at de Blasio, who for reasons of cowardice and entitlement, has and will do zero to reduce placard parking, whether legal or illegal.
James OUCH! I can hear you venting and I agree with most of what you have written. Florida does charge a higher property tax rate to ‘non-residents’, probably to offset projected lower the sales-tax revenue from a part-timer. Why couldn’t NYC do something? The property tax abatement is available as long as you ‘reside’ in the space. However, the definition should be more narrow and it should be the ‘primary’ residence of the tax payer. If it is not ‘primary’, then the abatement would not apply. If ‘primary’ then NYC and NYS taxes on income would apply. This should generate some cash for the MTA without resorting to taxes on taxes. High end RE buyers/investors will reprice the real estate to take this into account. It won’t bother 95% of NYC a bit.
Florida property tax rates are set by the county and the only way an out of state person pays more is when they cannot claim the Homestead Exemption. Florida residents that own at least two homes cannot take more than one exemption, and it has to be the house they live in.
Agree with James on most points. More bad tax policy does not make good tax policy. NYC and NYS politicians have their hands out to special interests, especially in NYC where De Blasio has turned it into an art form.
Unfortunately reforming our property tax system will be nearly impossible (just look at federal tax and entitlement reform efforts). They have created distortions in value across the market.
The “easiest” reform would be to eliminate the abatements for new developments. But it doesn’t serve any of our politicians interests. It’s easier for them to claim to close “loopholes” that they themselves have created.
I better go back to writing about hamburgers. I can barely keep up with you guys.
Since we need to somehow find tax income to “save” the MTA, along with congestion pricing, I would also like to see a tax on reckless drivers who believe themselves above the law, and who thus ignore inconveniences like red lights, pedestrian walkways, pedestrians themselves, and put lives at risk as a result. Canal Street in particular is a fun game of “Frogger” (does anyone remember Frogger?). Check your life insurance policy before attempting to cross.
A reasonable tax would be, say, impounding and selling their vehicles, and using the income to help fund MTA repairs.
I have always wondered why the city doesn’t ticket these jerk drivers. At first the city would make a fortune and then we might see an improvement. Add to this list the drivers who block intersections because it’s so important to advance a few feet in traffic.
Congestion Tax, Pied a Terre Tax, Millionaire Tax, Higher Fare, Parking Stickers, All extra charges. Forget about it. Just motivates people to move out and leave this madness. Raise the Taxes, Raise the Fare. Microchip everyone and Tax them when they pass go.
The solution in my opinion is lowering taxes not raising them. If the cost of living here gets to high people will leave. say no to tolls and congestion pricing.
Now we’re talking! People will move when the cost of living (tax burden/disincentive) gets too high.
Along these same lines, I think a lot of people (myself included) wouldn’t be as averse to paying the taxes if the money was actually being spent responsibly. The $ they are talking about going to the MTA is overwhelmingly NOT going to be used for repairs & upgrades, ti’s going towards the pension & entitlement obligations it has underfunded.
To Perryro: We are paying now every day for time-sucking, neighborhood-eroding, pedestrian-killing, lung-destroying traffic congestion. Ditto, sanity-damaging unreliable subways and slow (delayed in traffic) buses. I’m for practically anything that might begin to reverse that. Congestion pricing fits the bill.
To Jeff: Let people who love their cars more than our neighborhoods move. They’ll be replaced by people who appreciate that suburban transportation doesn’t work in a density-rich city. As for the MTA, though, I share your distrust but not your diagnosis. Pensions etc. must be paid regardless. Congestion revenues can fund replacement of century-old analog subway signals with digital signals that can speed trains and do wonders for our city.
Re: Congestion Pricing
Charging drivers to use bridges and tunnels, and taking those proceeds to subsidize NYC mass transit is a half century old practice.
Since 1970 the tolls from TBTA bridges and tunnels have been poured into the subways, buses, and commuter rail and have been used to back MTA bonds to pay for repairs and capital projects.
People should be used to it by now.
Charles… you’re kidding yourself if you think the Congestion revenues will be used for those things. They won’t be. They will be used to pay debt service and entitlements granted by irresponsible politicians who made deals with no regard to how in the heck they would ever be paid for.. all while neglecting the infrastructure that is fallign apart.
Hey.. i get it if you support congestion pricing b/c you think it may affect behavior in a way you like (and I like)… but I am loathe to want to give one more cent in taxes, fees, whatever until the MTA, NYC & just about every other agency in this city (country too) can actually show some fiscal responsibility in how it’s spent.