Should home buyers pay an additional city tax when they buy high-end properties in the five boroughs?
On Monday, the New York City Council revived a de Blasio proposal to raise revenue for the mayor’s affordable housing program by taxing the sale of high-end residential property in the city.
Is this a good idea?
Here are the details
The proposal is called a mansion tax. But home buyers in New York State already pay a mansion tax.
When they buy residential property priced at $1 million or more, they pay 1 percent of the purchase price in tax to the state. So, for example, a buyer of a $1.2 million two-bedroom apartment in Brooklyn Heights would pay a tax of $12,000.
The new tax would impose an additional 1 percent on the purchase of properties priced at $1.75 million or more. Properties costing $5 million or more would be taxed at 1.5 percent, The Wall Street Journal reported.
Revenues raised by the new tax would go to New York City, although the proposal must be approved by the state. Albany lawmakers rejected it last year when Mayor de Blasio proposed it.
The mansion tax was begun in 1989 by Governor Cuomo to raise money for the state. At the time, a $1 million home price tag was a far better indicator of wealth than it is in 2016.
Why the tax would be beneficial
Lawmakers estimate the revenue from the mansion tax would total about $200 million a year. The City Council plans to use funds generated by the tax for affordable housing programs.
The real-estate industry association REBNY supports it. Council members cited “reasons of equity” as the motive for supporting the proposal.
Some possible downsides
Some real estate agents have said the additional tax could hold back the real estate market. It will likely mean fewer homes will be priced around $1.75 million, just as today the existing mansion tax causes sellers to price homes below and above the $1 million threshold.
At least one Councilman, Staten Island Republican Joe Borelli, is opposed to the measure entirely.
- The median sales price of homes in Brooklyn was $662,431 in the first quarter, according to Douglas Elliman.
- City and state transfer taxes total 2.825 percent on properties over $1 million, according to the Journal. The new tax would bring that number to more than 4 percent on the most expensive properties.
- The new tax would affect an estimated 10 percent of home sales in New York City.
- Almost 30 years after the original mansion tax was enacted and in a record-breaking market, critics complain the $1 million state mansion tax now unfairly targets middle class buyers as opposed to the millionaires it was intended for.
- In 2004, New Jersey enacted its own 1 percent mansion tax on buildings that sell for $1 million or more.
What do you think?
Should buyers of high-end property in New York City pay an additional mansion tax on top of the one already imposed? Is $1.75 million the right threshold? Let us know in the comments.
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