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A plan to tax the rich on multimillion-dollar second homes in New York City has rapidly moved closer to reality, as legislative leaders in Albany and Gov. Andrew M. Cuomo have all signed off on the idea as a funding stream for the city’s beleaguered subway system.
Mr. Cuomo said on Monday there was a consensus among the state’s leaders, all Democrats, that a so-called pied-à-terre tax was a good idea, calling it the “only agreed-to new money” for a state facing a significant drop in tax revenue.
The purchase of a $238 million apartment on Central Park South by Kenneth C. Griffin, a hedge fund billionaire with an estimated net worth of $10 billion, may have helped make the legislation more feasible, proponents said.
“I think we have a mass transit system that is in crisis, public housing that is falling down around its residents and a yawning gap between the very wealthy and ordinary New Yorkers that is driving this conversation,” said Senator Brad Hoylman, a sponsor of his chamber’s pied-à-terre bill.
The $238 million record purchase was a visceral reminder that when wealthy buyers like Mr. Griffin purchase expensive apartments as second homes or investments, New York City and the state get less financial benefit than if the home were owned as a primary residence. If the buyers live out of state, they are not subject to state or city income taxes, and do not pay New York sales tax while outside the state.
Under the Senate’s bill, a pied-à-terre tax would institute a yearly tax on homes worth $5 million or more, and would apply to homes that do not serve as the buyer’s primary residence.
It was not immediately clear how much money the tax would raise; the office of the city comptroller, Scott M. Stringer, estimated that a pied-à-terre tax would bring in a minimum of $650 million annually if enacted today. And based on the expected revenue stream, Mr. Cuomo estimated that the state could then raise $9 billion in bonds, backed by the expected taxes paid by pied-à-terre owners.
The State Senate and Assembly were expected to include a version of the tax in budget proposals that are set to be released this week, although the exact details were still to be ironed out. And given the often-tumultuous process of negotiating the state budget, which is due April 1, it remains possible that the tax may not get approved this year.
But according to Senate leaders, the tax is long overdue.
“It is great that with a united Democratic Legislature and support from the governor, we can finally get this done,” said Mike Murphy, a spokesman for the Democratic majority in the Senate, adding that a tax on “ultrarich second homeowners in New York City is common sense and something we have supported for years.”
Mr. Cuomo said on Monday that with other potential sources of revenue in question — the possible legalization of marijuana, for example, has been slowed by political and practical concerns — other sources are now needed.
“If we did have marijuana passed, we wouldn’t have needed to substitute the pied-à-terre,” Mr. Cuomo said in remarks to reporters in Albany. “It’s a very tight box this year.”
Mr. Hoylman said there were many pressing needs that could use an influx of recurring funds, and was agnostic about whether the money be placed in a dedicated revenue stream for something such as the Metropolitan Transportation Authority.
His bill would create a sliding tax surcharge. For properties valued between $5 million and $6 million, a 0.5 percent surcharge would be added on the value over $5 million. Fees and a higher surcharge would apply to homes that sold for more than $6 million, topping out at a $370,000 fee and a 4 percent surcharge for homes valued at more than $25 million.
Corey Johnson, the speaker of the City Council, said there is “wide support” among members for a pied-à-terre tax because of the condition of the city’s vital infrastructure such as the subways and public housing. The city may have to pass legislation creating the tax should the Legislature authorize it.
In 2017, New York City had 75,000 pieds-à-terre, up from 55,000 such units since 2014, according to the New York City Housing and Vacancy Survey. The share of vacant apartments that are classified as pieds-à-terre has held steady during that time at about 30 percent.
Kathryn Wylde, president of the Partnership for New York City, said the tax would not be well received within the business community. She suggested that such a tax — combined with President Trump’s move to cap the amount of state and local income taxes that can be deducted on federal income taxes — could further push the wealthy to reconsider living here.
“A broad-based tax like the sales tax or the gas tax would be better received in the business community,” Ms. Wylde said.
But Moses Gates, a vice president at the Regional Plan Association, disputed the notion that New Yorkers would leave the city. The association believes that most wealthy pied-à-terre owners would pay the tax. If they chose to sell, then the property has the chance of being purchased by a full-time city resident, who would then be subject to income and sales tax.
“Either the housing is put back on the market for a full-time resident of New York City,” said Mr. Gates, “or folks who own extremely valuable residences contribute their fair share to making sure New York is the kind of city that provides a safe investment for high-end property.”
Published at Tue, 12 Mar 2019 16:41:12 +0000