New York 'oligarch tax' aimed at wealthy buyer's second homes

By U.S. EconomyFOXBusiness

Democratic state lawmakers from New York are seeking to revive a proposal that would add a property tax on part-time homeowners.

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State Sen. Brad Holyman is the main sponsor of a pied-a-terre, or “oligarch,” tax. The measure would add a surcharge on second homes in New York City valued at more than $5 million – an effort aimed at taxing people who have a residence, condo or apartment in the state but aren’t subject to income taxes.

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Homes worth between $5 million and $6 million would be taxed at a yearly rate of 0.5 percent, while those valued between $6 million and $10 million would be taxed at a rate of 1 percent, plus a fee of $5,000. The rate would gradually increase to 4 percent, plus a $370,000 fee, for those homes valued at more than $25 million.

The tax was originally introduced by Holyman in 2014, but its revival is linked to billionaire hedge fund manager Ken Griffin’s recent record-breaking purchase of a $238 million New York City apartment. Griffin is worth an estimated $10 billion and is expected to stay at the pad while he’s in town – meaning he is not subject to local or state income taxes and those financial benefits are largely lost to the city.

"I like to call it an oligarch tax because there are foreign owners currently purchasing property in New York City—tens of millions of dollars—not contributing to city services,” Holyman said of the tax.

The office of the city comptroller, Scott M. Stringer, said the tax could generate at least $650 million each year, as reported by The New York Times. It is estimated the tax will cost Griffin about $9 million annually.

The money is expected to be allocated toward municipal efforts – like affordable housing.

New York is one of several states that saw its population decline last year, which some conservatives have attributed to its penchant toward higher tax rates. During the year ending in July, in New York – where state and income taxes extend up to 8.82 percent – 48,510 people left the state.

Additionally, state and local taxes deductions were capped at $10,000 under the Tax Cuts and Jobs Act – which hurt higher-tax states like New York and California.

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On the other hand, populations grew in low tax states like Florida and Texas.

The pied-a-terre tax bill is currently in committee and is co-sponsored by three other state Democrats.