How a $238 Million Penthouse Turned a Long-Shot Tax on the Rich Into Reality - The New ... - 0 views
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Mr. Cuomo estimated on Monday that the state could raise $9 billion in bonds off that revenue that would help fund repairs for the city’s troubled subway system. But the philosophical and psychological impact might be even more profound, offering a concrete, almost classist, rebuke to ultra-wealthy apartment buyers who sojourn in the city, enjoying its services and amenities, but often pay few taxes.
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“There’s a growing realization with Billionaires’ Row, and the super-talls, that a lot of these homes are vacant and viewed as sky-high security deposit boxes for very wealthy foreigners,” said State Senator Brad Hoylman, the Manhattan Democrat who has sponsored the tax legislation for several years. And, he said, “because of our system of laws, because of our fire and police, because we are a secure financial investment, they should be charged for that.”
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The speed with which the pied-à-terre tax has become politically popular is also remarkable: The idea was floated by a liberal think tank and lawmakers in New York in 2014, but had repeatedly been shunted to death in committee by Republicans leading Albany’s upper chamber, and quietly ignored by Democrats leading the Assembly.
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The blue wave of November, however, changed the balance of power in Albany, with Democrats taking both houses of the Legislature, and unleashing a phalanx of progressives on the capital, part of a left-wing movement bent on correcting income inequality and pushing for higher taxes on the rich.
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The bill’s sudden political momentum blindsided real estate executives, who fear the tax could irreparably damage the city’s high-end market, which is already experiencing a downturn.
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“Five million dollars sounds like a lot; you can buy the biggest house in Montana,” said Dolly Lenz, chief executive of Dolly Lenz Real Estate and former vice chairwoman of Douglas Elliman Real Estate. “In New York, $5 million buys a two bedroom in Hudson Yards.”
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Under the city’s antiquated property tax system, co-ops and condos are not taxed at their true market value, but on the income generated by similar rental buildings.
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The $238 million apartment, purchased by the Chicago-based hedge fund billionaire Kenneth C. Griffin, is currently valued at $9.4 million, according to the Department of Finance. That comes out to less than 4 percent of the sales price. A property valued at that amount would pay approximately $516,000 in taxes per year, Ms. Stark said.
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For early-adopters of such taxes, the increasing interest and new legislative traction has been satisfying. “It’s like a fine wine,” said Ron Deutsch, executive director of Fiscal Policy Institute, the left-leaning think tank which offered a white paper on the idea in 2014. “Sometimes it takes a little time.”