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Why Billionaires Don't Pay Property Taxes in New York (2015)

110 points by fh973 5y ago

_rpd 5y ago
tl;dr: it is a deliberate consequence of the NYC tax code to encourage real estate development.
- pmoriarty 5y ago
  Does NYC need more untaxable real estate for billionaires?
  - JAlexoid 5y ago
    No. It needs more permits for mid tier buildings. And stopping the 80/20 tax exemption(20% of affordable housing) Because it's very clear that the middle class in NYC ends up paying for the lower middle class... while the richest people get away with laughable taxes. Take the Hudson Yards redistricting example...
    - kevin_thibedeau 5y ago
      > Take the Hudson Yards redistricting example... You mean Southwest Harlem.
      - JAlexoid 5y ago
        I don't know why you got downvoted, because they have literally gerrymandered the zoning map, to make the average income of Hudson Yards be counted as part of Harlem. https://www.bloomberg.com/news/articles/2019-04-12/the-visa-program-that-helped-pay-for-hudson-yards https://www.bloomberg.com/news/articles/2019-04-12/the-visa-...
  - imtringued 5y ago
    Assuming all those condos actually sell and its not just an architectural competition where half the building is sitting unsold because everyone wants their apartment to be in the top half then yes. Are there unsold apartments? Then no because it means there are too many of those. If you don't give Billionaires what they want they will just buy up the next best thing, like the apartment that you are currently renting.
parenthesis 5y ago
Because they've moved to Miami? Joking aside, I wonder if there is any other nation with as much tax variation between regions as the US? (Excluding special economic zones.)
- spikengineer 5y ago
  In Most countries, the National legislature can restructure states, impose nationwide simplification of tax policy etc within the limits of the federal structure they have. US is one of the few countries the relationship is the other way around. In most countries, the states get their power from the delegation of powers dictated by the union/federal constitution. In US, The union gets their power from the few matters that were delegated to them from the states. For example, India used to have such disparity in consumption taxes (not income tax) which was recently removed and simplified. The federal govt collects all consumption and income taxes and devolves the receipts to states based on pre-defined formulae enshrined in law. Edit: In an ideal world, instead of filing separate state and federal tax returns US should move to a common system where tax can be collected/enforced by one entity and the receipts devolved to states as per certain rules. This will remove income tax disparity between states and equalise business/opportunity costs (No more Delaware tax havens for companies to skirt taxation). This will simplify a lot of things. Most countries including mine have such a singular system.
  - visualradio 5y ago
    The federal government has the authority to appoint federal assessors to local property tax districts, to generate valuations for a national property taxation, and then share these updated valuations with state and local governments, which may then independently decide to use the same valuations for purposes of state and local taxation. It did so in order to collect the 1798 national property tax under John Adams and the three 1813-1816 national property taxes under James Madison. The federal government also has the ability to regulate state and local taxes using the interstate commerce clause. After the provision in the Articles of Confederation limiting the federal government to collecting direct taxes in proportion to state land values was abandoned, the supporters of direct taxation influenced by the French Physiocrats lobbied for the interstate commerce clause in order to ban state and local governments from collecting excise and sales taxes on goods sold across state lines, so that state and local governments would be forced to rely more heavily on property tax.
post_break 5y ago
Please add 2015 to the title.
- MrApathy 5y ago
  Very important. The centerpiece of this article is the 421-a exemption which was repealed last year. New condos being sold today are subject to the full assessed amount. All stock currently in the 421-a program is subject to a phased increase over a period of 25 years.
  - SirSourdough 5y ago
    Where the "full assessed value" is still only 5 or 10% of the price paid though? Doesn't seem like it hits at the heart of the issue. Seems like the sales price should be far more of factor in these ultra-luxury sales; the market says a house is worth $100m and an assessor looks at that and says the value for tax purposes is $5m, how does that make any sense?
etrabroline 5y ago
>Whatever course the de Blasio administration decides to pursue, it cannot afford to do nothing. This is a misdirection. de Blasio can no more screw over the real estate interests that control NYC politics than anyone else. He's an unpopular ineffective weak leader propped up by their system. His job is to take up space and be a punching bag, and he's doing a great job.
rmk 5y ago
A lot of these tax codes have evolved over time and accumulated a lot of handouts from whoever was in power to the people who put them there. The US federal tax code is filled to the brim with all sorts of exceptions inserted by a congressman here, a senator there over decades, either as quid-pro-quos or as politically expedient moves to protect their constituents' interest. A lot of it is couched as 'we are encouraging investment and providing incentives for that'. In many cases, this is true. If Uncle Sam does not want to make calls about where to allocate capital, he encourages private enterprise to make such calls via the tax code. I do not see why this is such a bad thing after all. Of course, this may not make sense for residential real-estate, but overall, it's surprising that people do not realise this simple fact when they complain loudly about how Warren Buffet pays a lower effective tax rate than his secretary --- of course that's by design because Warren Buffet has directed orders of magnitude more capital towards the 'right' ends than his secretary could, in several lifetimes. The whole article reads like a screed against the hyper-rich who 'aren't paying their fair share', but you have to ask, if they are merely taking advantage of (and helping shape) the tax code that incentivizes this behavior, who's really responsible here? Isn't it time we looked at our elected representatives much more critically?
seattle_spring 5y ago
This an outrage! We should increase taxes on the middle and upper middle class to compensate. That'll show em.
- jgalt212 5y ago
  And that's why the billionaires are democrats and the millionaires are republicans.
  - dmoy 5y ago
    only about 1/3 of US billionaires are democrats (That said, I could definitely believe that NYC billionaires would have a very different distribution)
    - coliveira 5y ago
      > NYC billionaires would have a very different distribution Of course, because democrats have higher presence in NY. It would be reversed otherwise. Remember that even D.T. was a democrat a few years ago.
    - fighterpilot 5y ago
      What's the source for that number?
      - dmoy 5y ago
        Any number of surveys going back the last ~10 years. Forbes, PolitiFact, Open Secrets, etc. Here's a more recent forbes one: https://www.forbes.com/sites/chasewithorn/2020/10/20/even-americas-billionaires-are-tilting-toward-biden-in-the-2020-presidential-race/?sh=7f951e382bb7 https://www.forbes.com/sites/chasewithorn/2020/10/20/even-am...
  - cheriot 5y ago
    Except Charles Koch, David Koch, Sheldon Anderson, Peter Thiel... and all the rest? Both parties had prominent billionaires in the last presidential election so I think it's safe to say this is pervasive.
paxys 5y ago
> Looking back, state lawmakers who passed the bill resetting property taxes for New York couldn't have dreamed of a skyscraper boom almost 35 years later. Really? New York politicians didn't realize that skyscrapers and luxury condos were a thing in the 1980s? This article lays out all the tax code shortcomings and writes it off as expensive condo sales being a new and unique phenomenon in NYC, which is bizarre. Here's a simpler explanation – these laws are working exactly as designed.
- Scoundreller 5y ago
  Kinda like land-transfer taxes that we have in Ontario Canada. Except corporations and trusts don’t transfer the land from generation to generation, so it’s basically a tax on people who’s living situation changes (upsizing, downsizing, death, divorce). So much for being a tax on speculators.
  - auxym 5y ago
    Add to that list: being laid off and having to move for a new job.
- ceejayoz 5y ago
  In fairness, the phenomenon of Russian, Chiinese, Middle Eastern etc. oligarchs parking funds in unused apartments and buildings in places like NYC, London, Vancouver, etc. is fairly recent, and has indeed triggered a boom: https://en.wikipedia.org/wiki/Billionaires%27_Row_(Manhattan) https://en.wikipedia.org/wiki/Billionaires%27_Row_(Manhattan...
- WillPostForFood 5y ago
  Really? New York politicians didn't realize that skyscrapers and luxury condos were a thing in the 1980s? I think that's overly cynical, and lacks historical context. In 1981, New York had gone through a decade of population decline. It was famously on the brink of bankruptcy before being bailed out by the federal government in 1975. There was New York City blackout of 1977. It was a much different, distressed, city at that time, and the idea of 90 million dollar condos would have seemed ludicrous.
coliveira 5y ago
The oldest "industry" in NYC is to give free handouts to millionaires/billionaires in the form of cheap land and real state subsidies. It is in reality a form of corruption that has been tolerated in NYC for as long as it has existed, and it is still practiced through the real estate tax benefits that apply only to high end buildings.
- ryanlol 5y ago
  Corruption, or reasonable policy?
  - kbenson 5y ago
    Those are orthogonal. Whether a policy is reasonable or not does note necessarily relate to whether it was achieved through corruption. Corruption is about why, not about the outcome. It's possible for a policy to be enacted through corruption that is good, and it's possible for a bad policy to be enacted with no corruption at all. While corruption often leads to bad policies and outcomes, what this actually means is that you can't point to a bad policy and know it was bad because of corruption any more than you can point to a good policy and know it's good because of lack of corruption.
cletus 5y ago
There's a nuance here the article mentions in passing but missed the significance of (IMHO): The ARV (assessed rental value) system that produces low effective tax rates for ultra-luxury condos is state legislation that predominantly impacts NYC. This is what makes reform so difficult. Most of NYS are SFH owners who simply don't pay their share of the property tax burden so resist any attempt to reform the system. Here's what NYC needs: 1. Ultra-luxury condos need to pay a higher effective property tax rate than where normal people live; 2. SFHs and condos owned by corporations or those not tax resident in NYC need to pay a higher rate. NYC shouldn't be simply for billionaires parking money in a city they visit for 2 days a year; 3. No tax abatements (421a) for ultra-luxury properties. Why are we subsidizing this at all? 4. SFHs and condos of similar property value should pay a similar rate of tax. Currently developers build ultra-luxury property because it's way more profitable than building affordable property. This needs to change.
- mullingitover 5y ago
  > Currently developers build ultra-luxury property because it's way more profitable than building affordable property. This needs to change. It's possible that developers build 'ultra-luxury' because building affordable property isn't profitable at all. Developing real estate in any major metro area in the US is insanely regulated and time-consuming.
- zip1234 5y ago
  I'm with you on removing tax incentives like that, but do not think requiring affordable housing is very useful. I have a friend that lived in a rent controlled unit that did not have hot water for almost an entire year. Requiring 'affordable' units creates really strange incentives. New York should just fix the root cause: zoning. Upzone the entire city or just remove zoning restrictions everywhere.
  - jskrn 5y ago
    I don't know NYC rent control policies but my experience with it in Berkeley was excellent. I negotiated down (in 2010) to $945/mo. After 5 years of rent controlled increases I was still paying less than $1,050/mo. In the same time, the identical next door apartment (new tenant) rented for $2150. When I left, my unit was rented out for $2,500/mo. Professional management company, owner lived on other side of the country, old but everything worked and they always fixed anything that came up. I'm realizing now that you are talking about affordable housing while this was open market but wanted to comment on the power and usefulness of rent control.
ALittleLight 5y ago
This seems incredibly dumb. Why not just create a tax category for condos and set a fair percentage for that, based on sale price? The whole matter of finding an analogous rental unit and extrapolating effective tax value is absurd. It seems like the kind of kludge you'd invent to live with an incomplete process. The solution is not to complain about the results but to fix the process. Also absurd is blaming the problem on how old the relevant laws are. Are these laws written in stone? "Law makers didn't anticipate this" is an excuse for a problem that is months old, not decades. Disgraceful. I wonder if the situation is still as described here or if anything has changed in the intervening years.
credit_guy 5y ago
I just went to streeteasy.com and looked at 10 random condos in Manhattan with a price between $20 and $30 MM and then 10 others between $1 and $2 MM. The average tax rate for the first category was 0.37%. For the second 1.07%. In both cases the standard deviation was about one third of the average.
outworlder 5y ago
> Why Billionaires Don't Pay Property Taxes in New York Same reason as everything else. https://www.youtube.com/watch?v=rStL7niR7gs https://www.youtube.com/watch?v=rStL7niR7gs (CGP Grey: Rules for Rulers)
kleiba 5y ago
In Germany, another sweet way for a company to avoid paying property taxes is that a good percentage of relevant properties are owned not by the company itself but by a subsidiary "company" specifically founded solely for that purpose. Then, when a property is to change hands, it isn't actually sold at all. Instead, the subsidiary company changes owners. Actually not even that, only the majority of the ownership is transferred, or else some other tax laws would kick in. But this way, if you do it right, almost no taxes need to be paid by either party.
- dahfizz 5y ago
  Doesn't the subsidiary which owns the property still have to pay the tax for the property they own? I don't understand how this decreases total tax paid.
  - akiselev 5y ago
    They still pay the annual property tax but avoid the real estate transfer tax and the speculative tax, which can be 5-10 years worth of the property tax.
  - compsciphd 5y ago
    my guess: in some places there are "purchase taxes" on real estate. so if you don't purchase the real estate, just the company that owns it, you don't pay the purchase tax as the real estate itself never changed hands.
  - joshlemer 5y ago
    You avoid land-transfer taxes.
- philsnow 5y ago
  There's some sort of similar law in California where transferring whole ownership or majority ownership triggers re-assessment of value for tax purposes, and if you can manage to somehow sell a house without triggering a re-assessment / the property keeps the old assessment even though years of appreciation have happened, the buyers can save a ton of money on property taxes. (at least, this was my completely amateur reading of the law at the time) The last time I bought a house, I thought about creating one or more LLCs solely to own the house, so that when it came time to sell the house, I would sell each LLC one at a time to the buyer. Of course the idea falls down completely in practice in a number of ways [0], but for some reason my mind can't help but consider the law as a puzzle. [0] you'd never find a buyer who was willing to do this weird LLC purchase instead of buying it through a realtor. also, the buyer would have to have some assurance that, after selling you one or two of the LLCs, you'd sell the remaining ones to them as well under the same terms... but that sounds a lot like a contract to sell all three, which is transferring whole ownership. absolutely any judge would look at this and be very cross with me. All of this is completely aside from the question of whether it's immoral to try to dodge property taxes to begin with (though in this case, I wouldn't be, I would be facilitating the next buyer to do so).
autokad 5y ago
click bait tittle, they pay property taxes in NYC, just a much lower % rate. > "The combined 89th and 90th floor penthouse at One57 set the new high-water mark for a single-family residence sale in New York. While the owner paid nine figures for the penthouse, the city only taxed the unit for $17,000 in property taxes. That's an effective property tax rate of 0.017 percent—about one one-hundredth of the average national tax rate."
dheera 5y ago
Why don't we just get rid of property taxes, and just keep income tax and sales tax and be done with it? I find it immoral to tax people on things they already own and have already paid taxes on in the form of the income they used to purchase said item. A big part of the upside of this will be cheaper rents for the rest of us, because right now, ultimately, real estate owners just pass the property tax responsibility to us in the form of higher rents.
- xur17 5y ago
  > A big part of the upside of this will be cheaper rents for the rest of us, because right now, ultimately, real estate owners just pass the property tax responsibility to us in the form of higher rents. In the short term, maybe, but in the long term this will just drive property values up even further, and I imagine it will make people more likely to hold onto property they aren't actively using.
- snidane 5y ago
  Somehow taxing peoples' labor is not immoral? From efficiency standpoint, property taxes will be more efficient than income taxes when it comes to expenditures for local infrastructure. Having only income taxes and no property/land taxes implies a direct subsidy from the middle class to aristocracy billionaire class. The exact reverse of what your intention seems to be? No property tax removes the need to return properties to the market, when underused. It would result in extremely high properry prices in the environment of zero interest rates. Pricing everybody out completely. And no, property taxes are not passed down in higher rents. They do the opposite - decrease rents - by making the market more liquid. See "tax incidence".
- gremlinsinc 5y ago
  All land in the united states should be collectively owned by the citizens. I think they should do away with or curtail other taxes for a Georgian style land-value-tax system that could also fully fund Universal Basic Income and Universal Healthcare.
Proven 5y ago
Why should billionaires pay tax that's different from others? If they are any smart they'll GTHO and move to Florida or Puerto Rico before socialists raise taxes.

110 points by fh973 5y ago

_rpd 5y ago

tl;dr: it is a deliberate consequence of the NYC tax code to encourage real estate development.

pmoriarty 5y ago
Does NYC need more untaxable real estate for billionaires?
- JAlexoid 5y ago
  No. It needs more permits for mid tier buildings. And stopping the 80/20 tax exemption(20% of affordable housing) Because it's very clear that the middle class in NYC ends up paying for the lower middle class... while the richest people get away with laughable taxes. Take the Hudson Yards redistricting example...
  - kevin_thibedeau 5y ago
    > Take the Hudson Yards redistricting example... You mean Southwest Harlem.
    - JAlexoid 5y ago
      I don't know why you got downvoted, because they have literally gerrymandered the zoning map, to make the average income of Hudson Yards be counted as part of Harlem. https://www.bloomberg.com/news/articles/2019-04-12/the-visa-program-that-helped-pay-for-hudson-yards https://www.bloomberg.com/news/articles/2019-04-12/the-visa-...
- imtringued 5y ago
  Assuming all those condos actually sell and its not just an architectural competition where half the building is sitting unsold because everyone wants their apartment to be in the top half then yes. Are there unsold apartments? Then no because it means there are too many of those. If you don't give Billionaires what they want they will just buy up the next best thing, like the apartment that you are currently renting.

parenthesis 5y ago

Because they've moved to Miami? Joking aside, I wonder if there is any other nation with as much tax variation between regions as the US? (Excluding special economic zones.)

spikengineer 5y ago
In Most countries, the National legislature can restructure states, impose nationwide simplification of tax policy etc within the limits of the federal structure they have. US is one of the few countries the relationship is the other way around. In most countries, the states get their power from the delegation of powers dictated by the union/federal constitution. In US, The union gets their power from the few matters that were delegated to them from the states. For example, India used to have such disparity in consumption taxes (not income tax) which was recently removed and simplified. The federal govt collects all consumption and income taxes and devolves the receipts to states based on pre-defined formulae enshrined in law. Edit: In an ideal world, instead of filing separate state and federal tax returns US should move to a common system where tax can be collected/enforced by one entity and the receipts devolved to states as per certain rules. This will remove income tax disparity between states and equalise business/opportunity costs (No more Delaware tax havens for companies to skirt taxation). This will simplify a lot of things. Most countries including mine have such a singular system.
- visualradio 5y ago
  The federal government has the authority to appoint federal assessors to local property tax districts, to generate valuations for a national property taxation, and then share these updated valuations with state and local governments, which may then independently decide to use the same valuations for purposes of state and local taxation. It did so in order to collect the 1798 national property tax under John Adams and the three 1813-1816 national property taxes under James Madison. The federal government also has the ability to regulate state and local taxes using the interstate commerce clause. After the provision in the Articles of Confederation limiting the federal government to collecting direct taxes in proportion to state land values was abandoned, the supporters of direct taxation influenced by the French Physiocrats lobbied for the interstate commerce clause in order to ban state and local governments from collecting excise and sales taxes on goods sold across state lines, so that state and local governments would be forced to rely more heavily on property tax.

post_break 5y ago

Please add 2015 to the title.

MrApathy 5y ago
Very important. The centerpiece of this article is the 421-a exemption which was repealed last year. New condos being sold today are subject to the full assessed amount. All stock currently in the 421-a program is subject to a phased increase over a period of 25 years.
- SirSourdough 5y ago
  Where the "full assessed value" is still only 5 or 10% of the price paid though? Doesn't seem like it hits at the heart of the issue. Seems like the sales price should be far more of factor in these ultra-luxury sales; the market says a house is worth $100m and an assessor looks at that and says the value for tax purposes is $5m, how does that make any sense?

etrabroline 5y ago

>Whatever course the de Blasio administration decides to pursue, it cannot afford to do nothing. This is a misdirection. de Blasio can no more screw over the real estate interests that control NYC politics than anyone else. He's an unpopular ineffective weak leader propped up by their system. His job is to take up space and be a punching bag, and he's doing a great job.

rmk 5y ago

A lot of these tax codes have evolved over time and accumulated a lot of handouts from whoever was in power to the people who put them there. The US federal tax code is filled to the brim with all sorts of exceptions inserted by a congressman here, a senator there over decades, either as quid-pro-quos or as politically expedient moves to protect their constituents' interest. A lot of it is couched as 'we are encouraging investment and providing incentives for that'. In many cases, this is true. If Uncle Sam does not want to make calls about where to allocate capital, he encourages private enterprise to make such calls via the tax code. I do not see why this is such a bad thing after all. Of course, this may not make sense for residential real-estate, but overall, it's surprising that people do not realise this simple fact when they complain loudly about how Warren Buffet pays a lower effective tax rate than his secretary --- of course that's by design because Warren Buffet has directed orders of magnitude more capital towards the 'right' ends than his secretary could, in several lifetimes. The whole article reads like a screed against the hyper-rich who 'aren't paying their fair share', but you have to ask, if they are merely taking advantage of (and helping shape) the tax code that incentivizes this behavior, who's really responsible here? Isn't it time we looked at our elected representatives much more critically?

seattle_spring 5y ago

This an outrage! We should increase taxes on the middle and upper middle class to compensate. That'll show em.

jgalt212 5y ago
And that's why the billionaires are democrats and the millionaires are republicans.
- dmoy 5y ago
  only about 1/3 of US billionaires are democrats (That said, I could definitely believe that NYC billionaires would have a very different distribution)
  - coliveira 5y ago
    > NYC billionaires would have a very different distribution Of course, because democrats have higher presence in NY. It would be reversed otherwise. Remember that even D.T. was a democrat a few years ago.
  - fighterpilot 5y ago
    What's the source for that number?
    - dmoy 5y ago
      Any number of surveys going back the last ~10 years. Forbes, PolitiFact, Open Secrets, etc. Here's a more recent forbes one: https://www.forbes.com/sites/chasewithorn/2020/10/20/even-americas-billionaires-are-tilting-toward-biden-in-the-2020-presidential-race/?sh=7f951e382bb7 https://www.forbes.com/sites/chasewithorn/2020/10/20/even-am...
- cheriot 5y ago
  Except Charles Koch, David Koch, Sheldon Anderson, Peter Thiel... and all the rest? Both parties had prominent billionaires in the last presidential election so I think it's safe to say this is pervasive.

paxys 5y ago

> Looking back, state lawmakers who passed the bill resetting property taxes for New York couldn't have dreamed of a skyscraper boom almost 35 years later. Really? New York politicians didn't realize that skyscrapers and luxury condos were a thing in the 1980s? This article lays out all the tax code shortcomings and writes it off as expensive condo sales being a new and unique phenomenon in NYC, which is bizarre. Here's a simpler explanation – these laws are working exactly as designed.

Scoundreller 5y ago
Kinda like land-transfer taxes that we have in Ontario Canada. Except corporations and trusts don’t transfer the land from generation to generation, so it’s basically a tax on people who’s living situation changes (upsizing, downsizing, death, divorce). So much for being a tax on speculators.
- auxym 5y ago
  Add to that list: being laid off and having to move for a new job.
ceejayoz 5y ago
In fairness, the phenomenon of Russian, Chiinese, Middle Eastern etc. oligarchs parking funds in unused apartments and buildings in places like NYC, London, Vancouver, etc. is fairly recent, and has indeed triggered a boom: https://en.wikipedia.org/wiki/Billionaires%27_Row_(Manhattan) https://en.wikipedia.org/wiki/Billionaires%27_Row_(Manhattan...
WillPostForFood 5y ago
Really? New York politicians didn't realize that skyscrapers and luxury condos were a thing in the 1980s? I think that's overly cynical, and lacks historical context. In 1981, New York had gone through a decade of population decline. It was famously on the brink of bankruptcy before being bailed out by the federal government in 1975. There was New York City blackout of 1977. It was a much different, distressed, city at that time, and the idea of 90 million dollar condos would have seemed ludicrous.

coliveira 5y ago

The oldest "industry" in NYC is to give free handouts to millionaires/billionaires in the form of cheap land and real state subsidies. It is in reality a form of corruption that has been tolerated in NYC for as long as it has existed, and it is still practiced through the real estate tax benefits that apply only to high end buildings.

ryanlol 5y ago
Corruption, or reasonable policy?
- kbenson 5y ago
  Those are orthogonal. Whether a policy is reasonable or not does note necessarily relate to whether it was achieved through corruption. Corruption is about why, not about the outcome. It's possible for a policy to be enacted through corruption that is good, and it's possible for a bad policy to be enacted with no corruption at all. While corruption often leads to bad policies and outcomes, what this actually means is that you can't point to a bad policy and know it was bad because of corruption any more than you can point to a good policy and know it's good because of lack of corruption.

cletus 5y ago

There's a nuance here the article mentions in passing but missed the significance of (IMHO): The ARV (assessed rental value) system that produces low effective tax rates for ultra-luxury condos is state legislation that predominantly impacts NYC. This is what makes reform so difficult. Most of NYS are SFH owners who simply don't pay their share of the property tax burden so resist any attempt to reform the system. Here's what NYC needs: 1. Ultra-luxury condos need to pay a higher effective property tax rate than where normal people live; 2. SFHs and condos owned by corporations or those not tax resident in NYC need to pay a higher rate. NYC shouldn't be simply for billionaires parking money in a city they visit for 2 days a year; 3. No tax abatements (421a) for ultra-luxury properties. Why are we subsidizing this at all? 4. SFHs and condos of similar property value should pay a similar rate of tax. Currently developers build ultra-luxury property because it's way more profitable than building affordable property. This needs to change.

mullingitover 5y ago
> Currently developers build ultra-luxury property because it's way more profitable than building affordable property. This needs to change. It's possible that developers build 'ultra-luxury' because building affordable property isn't profitable at all. Developing real estate in any major metro area in the US is insanely regulated and time-consuming.
zip1234 5y ago
I'm with you on removing tax incentives like that, but do not think requiring affordable housing is very useful. I have a friend that lived in a rent controlled unit that did not have hot water for almost an entire year. Requiring 'affordable' units creates really strange incentives. New York should just fix the root cause: zoning. Upzone the entire city or just remove zoning restrictions everywhere.
- jskrn 5y ago
  I don't know NYC rent control policies but my experience with it in Berkeley was excellent. I negotiated down (in 2010) to $945/mo. After 5 years of rent controlled increases I was still paying less than $1,050/mo. In the same time, the identical next door apartment (new tenant) rented for $2150. When I left, my unit was rented out for $2,500/mo. Professional management company, owner lived on other side of the country, old but everything worked and they always fixed anything that came up. I'm realizing now that you are talking about affordable housing while this was open market but wanted to comment on the power and usefulness of rent control.

ALittleLight 5y ago

This seems incredibly dumb. Why not just create a tax category for condos and set a fair percentage for that, based on sale price? The whole matter of finding an analogous rental unit and extrapolating effective tax value is absurd. It seems like the kind of kludge you'd invent to live with an incomplete process. The solution is not to complain about the results but to fix the process. Also absurd is blaming the problem on how old the relevant laws are. Are these laws written in stone? "Law makers didn't anticipate this" is an excuse for a problem that is months old, not decades. Disgraceful. I wonder if the situation is still as described here or if anything has changed in the intervening years.

credit_guy 5y ago

I just went to streeteasy.com and looked at 10 random condos in Manhattan with a price between $20 and $30 MM and then 10 others between $1 and $2 MM. The average tax rate for the first category was 0.37%. For the second 1.07%. In both cases the standard deviation was about one third of the average.

outworlder 5y ago

> Why Billionaires Don't Pay Property Taxes in New York Same reason as everything else. https://www.youtube.com/watch?v=rStL7niR7gs https://www.youtube.com/watch?v=rStL7niR7gs (CGP Grey: Rules for Rulers)

kleiba 5y ago

In Germany, another sweet way for a company to avoid paying property taxes is that a good percentage of relevant properties are owned not by the company itself but by a subsidiary "company" specifically founded solely for that purpose. Then, when a property is to change hands, it isn't actually sold at all. Instead, the subsidiary company changes owners. Actually not even that, only the majority of the ownership is transferred, or else some other tax laws would kick in. But this way, if you do it right, almost no taxes need to be paid by either party.

dahfizz 5y ago
Doesn't the subsidiary which owns the property still have to pay the tax for the property they own? I don't understand how this decreases total tax paid.
- akiselev 5y ago
  They still pay the annual property tax but avoid the real estate transfer tax and the speculative tax, which can be 5-10 years worth of the property tax.
- compsciphd 5y ago
  my guess: in some places there are "purchase taxes" on real estate. so if you don't purchase the real estate, just the company that owns it, you don't pay the purchase tax as the real estate itself never changed hands.
- joshlemer 5y ago
  You avoid land-transfer taxes.
philsnow 5y ago
There's some sort of similar law in California where transferring whole ownership or majority ownership triggers re-assessment of value for tax purposes, and if you can manage to somehow sell a house without triggering a re-assessment / the property keeps the old assessment even though years of appreciation have happened, the buyers can save a ton of money on property taxes. (at least, this was my completely amateur reading of the law at the time) The last time I bought a house, I thought about creating one or more LLCs solely to own the house, so that when it came time to sell the house, I would sell each LLC one at a time to the buyer. Of course the idea falls down completely in practice in a number of ways [0], but for some reason my mind can't help but consider the law as a puzzle. [0] you'd never find a buyer who was willing to do this weird LLC purchase instead of buying it through a realtor. also, the buyer would have to have some assurance that, after selling you one or two of the LLCs, you'd sell the remaining ones to them as well under the same terms... but that sounds a lot like a contract to sell all three, which is transferring whole ownership. absolutely any judge would look at this and be very cross with me. All of this is completely aside from the question of whether it's immoral to try to dodge property taxes to begin with (though in this case, I wouldn't be, I would be facilitating the next buyer to do so).

autokad 5y ago

click bait tittle, they pay property taxes in NYC, just a much lower % rate. > "The combined 89th and 90th floor penthouse at One57 set the new high-water mark for a single-family residence sale in New York. While the owner paid nine figures for the penthouse, the city only taxed the unit for $17,000 in property taxes. That's an effective property tax rate of 0.017 percent—about one one-hundredth of the average national tax rate."

dheera 5y ago

Why don't we just get rid of property taxes, and just keep income tax and sales tax and be done with it? I find it immoral to tax people on things they already own and have already paid taxes on in the form of the income they used to purchase said item. A big part of the upside of this will be cheaper rents for the rest of us, because right now, ultimately, real estate owners just pass the property tax responsibility to us in the form of higher rents.

xur17 5y ago
> A big part of the upside of this will be cheaper rents for the rest of us, because right now, ultimately, real estate owners just pass the property tax responsibility to us in the form of higher rents. In the short term, maybe, but in the long term this will just drive property values up even further, and I imagine it will make people more likely to hold onto property they aren't actively using.
snidane 5y ago
Somehow taxing peoples' labor is not immoral? From efficiency standpoint, property taxes will be more efficient than income taxes when it comes to expenditures for local infrastructure. Having only income taxes and no property/land taxes implies a direct subsidy from the middle class to aristocracy billionaire class. The exact reverse of what your intention seems to be? No property tax removes the need to return properties to the market, when underused. It would result in extremely high properry prices in the environment of zero interest rates. Pricing everybody out completely. And no, property taxes are not passed down in higher rents. They do the opposite - decrease rents - by making the market more liquid. See "tax incidence".
gremlinsinc 5y ago
All land in the united states should be collectively owned by the citizens. I think they should do away with or curtail other taxes for a Georgian style land-value-tax system that could also fully fund Universal Basic Income and Universal Healthcare.

Proven 5y ago

Why should billionaires pay tax that's different from others? If they are any smart they'll GTHO and move to Florida or Puerto Rico before socialists raise taxes.