Mayor Bill de Blasio is asking the state legislature to enact a new "mansion tax" in order to bring more money into New York City's coffers. The goal is to help some 25,000 senior citizens throughout the city stay in their homes at prices they can afford.
The proposed 2.5 percent tax would impact homes with a sale price of $2 million and over. The current mansion tax, implemented by Gov. Mario Cuomo back in the 1980s, is 1 percent for homes valued at $1 million and above.
With 4,500 homes in the $2 million-plus price range projected to be sold this year, the plan would bring in about $336 million to be used for affordable housing.
However, some real estate professionals note that the New York real estate market is softening, and an additional tax would only harm it more. They've voiced strong words against the mayor's proposal, saying that wealthy New Yorkers already contribute significantly to the city's revenue via income, property and sales taxes.
An executive with one residential brokerage firm says that the proposal could push foreign investors into lower-priced properties to avoid the additional tax. She says, "This will mean more competition in the already competitive market below $2.5 million, which will have a negative impact on local New Yorkers who are looking at the average price point between $1-2 million."
Mayor de Blasio cites the improved tax climate for "the wealthiest among us" based on "proposals already put forward by President Trump and Congress." He says that with the "substantial federal tax break that it's time that they pay their share of the state and local taxes."
With the considerable pushback the proposal is getting from the real estate community and others combined with a Republican majority in the state Senate, it seems unlikely that it will pass. Senate Majority Leader John Flanagan has already called it a "non-starter."
Many factors impact the real estate market, including — as in this case — politics. Experienced real estate attorneys keep abreast of all of these factors and advise their clients accordingly.
Source: Real Estate Weekly, "Millionaires woe as mansion tax threatens softening housing market," Christian Brazil Bautista, Feb. 10, 2017