When a media executive paid $150 million for a mansion in the posh Bel Air enclave of Los Angeles in December, public records showed he would owe more than $1.3 million a year in property taxes. It’s a tax rate of around 0.9 percent– about the same as a fellow record-breaker in distant Palm Beach, Florida, where a hedge fund titan snapped up a mega-mansion for $111 million, taking on a property tax liability of around $1 million, Mansion Global reports.
Those two tax bills stand in stark contrast to New York City’s blockbuster $238 million condo sale last year – the most expensive home deal ever in the U.S. – for when the owner, hedge fund manager Kenneth Griffin, settles his $531,797 tax bill this year, he’ll pay an effective tax rate of only 0.22 percent. That rate is lower than Laredo, Texas, the cheapest property tax jurisdiction in the country. More importantly, the billionaire pays a fraction of what working-class homeowners in the neighboring Bronx pay, relative to their home values, according to a city commission that’s calling for a major overhaul to the city’s convoluted property tax law.
“There can be vast differences in how properties are classified, valued and assessed, lending credence to the widely held characterization that the system is overly complex, opaque and arcane,” commissioners wrote in their preliminary recommendations published at the end of January.
The changes would tax co-ops, condos and one- to- three-family homes in a unified way and do away with certain tax caps, which would in effect raise property taxes on high-end real estate in affluent areas while lessening the tax burden on lower-income homeowners. They would also bring the city in line with standard practice elsewhere, such as Los Angeles and Palm Beach counties, for example, where all homes are assessed and taxed at full-market value.
The current antiquated system assesses some co-ops and condos based on comparable rental buildings, which leads to vast undervaluations for tax purposes. That means uber-luxe condos like Griffin's, currently paying tax on a fraction of their market value, would see the most dramatic increase in property taxes under the proposed changes. Griffin would see his tax bill grow more than fivefold to nearly $3 million a year, according to a hypothetical example in the commission’s report.
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