Pitching a so-called "mansion tax" for New York City homeowners this week, Mayor Bill de Blasio made the case that the city's wealthiest residents already stand to benefit from tax breaks under President Donald Trump, and therefore should be able to afford an additional property tax.
"The wealthiest among us have every reason to expect a major new tax break at the federal level given the proposals already put forward by President Trump and Congress," de Blasio testified in Albany on Monday. "We think in light of the fact that the wealthiest will be receiving a substantial federal tax break that it’s time that they pay their share of the state and local taxes."
The tax, which City Hall says would go towards affordable housing for seniors, would be a 2.5 percent property transfer tax on sales north of $2 million. The city's budget office predicts that the tax would impact about 4,500 real estate sales in the coming fiscal year, generating about $336 million for the city.
"The proceeds will help provide affordable housing to roughly 25,000 low-income seniors," said mayoral housing spokesperson Wiley Norvell.
The assistance, in the form of vouchers, would be in addition to affordable housing commitments for seniors in Mayor de Blasio's controversial affordable housing plan. That plan has to date generated financing for more than 4,000 units of affordable senior housing, according to the city.
This is not the first time Mayor de Blasio has pitched a mansion tax. His first, pitched in 2015, failed. Budget experts say this request—which requires approval from the state senate and assembly, as well as the governor's office—is a long shot.
"It will likely be a tough sell in Albany," said Doug Turetsky, a spokesperson for the NYC Independent Budget Office. "They've got their own high-end tax up for renewal this year. It's a stretch to think that Albany will hit high-end New Yorkers twice."
Norvell countered that while "nothing worth doing is ever easy," he predicts the climate in Washington will sway the state.
If the tax were to pass, Turetsky predicted, it could "even the playing field" for New York homeowners. Currently, he said, many millionaires avoid paying a mortgage recording tax, or tax for taking out a mortgage, by paying for properties in cash or doing their financing overseas. "If you are getting your financing from a bank in France or Dubai there is no mortgage recording tax to the city," he explained.
On the other hand, he said, wealthy people might simply start making sales just below $2 million to avoid the tax. "What you are likely to see with this kind of tax, if you have a $2 million threshold, is an increasing number of sales coming in at $1.9 million, just under the threshold," he said.
"You are looking at a group that has the option to evade the tax," said Maria Doulis, director of city studies for the Citizens Budget Commission, a nonpartisan research group that analyzes city and state spending. "They can move, they can not buy property here, they can make decisions to change behavior based on the tax."
According to City Hall, there are a bulk of sales happening in the neighborhood of $4 million, which would not likely sell for less than $2 million to avoid the tax.
The governor's office did not immediately comment on the mayor's proposal.
Bobbie Sackman, a spokeswoman for LiveOn NY, an advocacy group for seniors, stressed Tuesday that the need for senior affordable housing is "deep and dire." According to a recent LiveOn study, the waiting list for senior public housing is about 200,000 people. According to the group, two out of three seniors living in rent stabilized housing pay more than a third of their income in rent, making them rent-burdened.
Sackman said that while "we don't know where the mansion tax is going to go," she'd like to see it made available to seniors who want to stay in their current apartments. "To keep seniors in their current homes is key," she said.
Norvell said the tax would likely fund a combination of new senior housing construction, and vouchers for rent-burdened seniors.