It languished for years when Republicans controlled the state legislature. It was revived when Democrats took over early this year. It suddenly seemed like a sure thing – until the all-powerful New York City real estate industry flexed its muscles. Then, over the past weekend, the pied-a-terre tax on luxury second (or third or fourth) homes of rich absentee owners died an abrupt death.
The $175 billion state budget passed over the weekend contains, instead, a “mansion tax” coupled with a real estate transfer tax, two one-time levies that will be charged at the point of sale of multimillion-dollar houses, co-ops and condominiums, the New York Times reports. The tax tops out at 4.15 percent on the sale of properties worth $25 million or more. Revenues generated by the tax are earmarked for repairs to the city’s battered subway system.
But the collapse of the pied-a-terre tax on homes worth $5 million or more provides a crystalline window into the way Albany has worked for years – and still works. Once they realized that the pied-a-terre tax was likely to become law, deep-pocketed developers hired well connected lobbyists and presented legislators with printouts of economic analyses. They wrote opinion pieces, warning that the high-end market, already weakened, would collapse under the weight of a recurring surcharge. For good measure, brokers chimed in that the proposed tax was a form of “class warfare.”
Legislative leaders said the replacement proposal would achieve the same ends of making the wealthy contribute more to the city’s upkeep. But the abrupt rise and fall of the pied-à-terre tax also illustrated the challenges in translating progressive rhetoric into policy – and the continuing influence of the traditional powers in Albany. In the end, it was same old same old.
“I don’t think there’s a question that real estate has driven politics, really, forever,” said Assemblywoman Deborah Glick, one of the bill’s sponsors. “So it’s not a shock.”
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