Wealthy buyers of second homes in New York City – along with their brokers – sighed with relief last week when state lawmakers abandoned a proposed pied-a-terre tax. In its place, the state legislature approved two one-time, point-of-sale levies: a progressive transfer tax and a progressive mansion tax. Now that brokers are crunching the numbers, there’s a dawning realization that mid-level buyers will get hit hardest while the 1 percent will, once again, get the sweetest deal.
“What’s pretty unbelievable,” Leonard Steinberg of Compass tells the Real Deal, “is the only message that has been broadcast from Albany is that people who buy $25 million and more will be paying. There’s been very little mention that everyone between $2 million and $25 million will be paying more taxes, as well.”
Adds Warburg Realty’s Sheila Trichter, “It seems that these tax increases are once again hurting the middle class and helping the 1 percent.”
The new mansion tax will start at 1.25 percent on sales above $2 million but under $3 million; the tax tops out at 3.9 percent for sales above $25 million, according to the state’s new budget. (The existing 1 percent mansion tax is baked into those figures.) Combined with a progressive transfer tax, the assessments are expected to generate $365 million in revenue per year, which will go toward fixing the city’s subways.
Donna Olshan, founder of Olshan Realty, was opposed to the pied-a-terre tax but notes that it’s mid-level buyers, not the super-wealthy, who will bear the brunt of the new tax math. Buyers in the $5 million to under $10 million segment will be shouldering the biggest portion of the new mansion taxes – based on 637 deals in that price segment last year, Olshan’s figures show.
The Real Deal also calculated the effect of the new taxes on the biggest purchases of 2018, including the $74 million duplex penthouse at 520 Park Avenue. Under the old system, the mansion and transfer taxes totaled $2.1 million, while under the new system they would have totaled $4.4 million – a doubling of the bill, to be sure, but still a pittance for the buyer of a $74 million bauble. And a fraction of what that buyer would have paid, year after year, under a pied-a-terre tax. The bottom line: the 1 percent wins again.
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