Property Tax Post: New York’s Mansion Tax May Be Getting a Makeover

 

 

New York State’s “Mansion Tax” may be due for an expansion. This week, New York Mayor Bill de Blasio (D) proposed that properties sold for more than $2 million be taxed at 2.5 percent.[1] The state already requires sellers or buyers to pay a 1 percent additional real estate transfer tax on residential real property sold for over $1 million dollars. If passed, the tax revenue is intended to help fund more affordable housing for senior citizens.

The Mayor argued that those potentially subject to the tax could afford the payment based on anticipated income tax breaks they are likely to receive under the Trump Administration, according to the Daily News. However, New York State Senate Majority Leader John Flanagan (R-Suffolk) described the proposal as a “‘non-starter’ with the ruling GOP majority,” suggesting that is it unlikely the proposal will pass muster. Mayor de Blasio’s similar proposal in 2015 didn’t pass the state legislature.

On the one hand, uncertainties about federal funding for affordable and public housing have led some to believe that this proposal might lead to a different result. As such, the proposal has also received some support from at least one group that advocates on behalf of seniors. On the other hand, some argue that the tax is more likely to drive down sales, ultimately generating less revenue.

Notwithstanding such criticisms, the current 1 percent mansion tax has already generated considerable revenue since it was imposed in 1989. In 2014, CNBC reported that the mansion tax generated $259 million, breaking records. Perhaps, if there are no reasonable solutions to fund senior housing, and the possibility remains that federal funding might be slashed, Mayor de Blasio may see the scales tip in favor of the proposal.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn:  Do you think increasing the mansion tax will generate more tax revenue or drive down sales?

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[1] It looks like under the proposal properties sold for millions will be taxed at 1 percent on consideration at or above one million and 2.5 percent for consideration at or above $2 million.