NYC should decrease income taxes and increase property taxes. I don't mind out of towners buying expensive condo's, but they should help pay for the services that make New York great. Right now, because their income is all earned out of town and property taxes are very low, so they are not really supporting the city.
Good luck selling that to the rest of the residents; property taxes are pretty unpopular even compared to income taxes.
And really, the better way to look at it is that the property tax paid by some multi-billionaire who only drops into town for a few weekends a year is all profit for the city. They're not using services. They're not sending their kids to public school or generating garbage or calling the police ... whatever they pay to the city each year is just gravy. They're subsidizing people who actually do live there, and would otherwise have to pay more taxes (of one form or another) for the actual services that NYC provides.
Government services are not something that are "used" in the normal sense of the word. Central Park needs to get mowed, street lights need to be lit, police and fire protection needs to be provided, etc. regardless of whether residents are there or not.
Given that the people in question are there for just days/weeks per year, their "use" of the services seems in line with the taxes they pay. Without knowing specific numbers it's hard to get exact math, but if someone pays property tax on a multi-million dollar condo purchase and is only in the city for 3 weeks per year, surely they aren't overusing the services?
If they can afford a crash pad in new york city, then a little extra in property taxes is probably not gonna break the bank.
Another way to look at the issue, is to evaluate the 'tax collection opportunity costs' of the absentee owners. For every condo that gets bought by an absentee owner (as opposed to a local owner), NYC loses income tax, sales tax, and general economic activity (these are wealthy individuals, there spending is a boost to the local economy). By increasing the property taxes, NYC would shift the cost-benefit ratio towards those that are actually going to utilize the property (thus resulting in more income and sales taxes), while also bringing in more property taxes
Finally, if these wealthy individuals were so concerned about only paying for what they "use", then it would make a lot more sense if they just got a nice hotel room for the days/weeks per year that they are in NYC, rather than buying a condo that sits empty most of the time.
The "probably not gonna break the bank meme" is how class warfare propagates; it offers nothing useful in terms of creating progressive and fair tax rates.
And your hotel idea is exactly what will happen if property tax rates go up. Think through what the effects of that would be...
Forget looking at this from a moral perspective and try the utilitarian approach. It is not socially desirable to have underutilized real estate in a place as crowded as NYC. Put it this way: Renting out an empty space is effectively the equivalent of building a new space!
I normally disapprove of using tax policy to modify behavior, but in this case it makes sense. Property tax is like the "rent" citizens pay to the government for using land. If the rent is too low, people overconsume the scarce resource.
Possibly. But so does underused real estate, by reducing supply. And housing is a fairly inelastic good, so even a 5-10% increase in supply could have a significant impact.
Not necessarily. Rent is decided by supply, and demand. Property taxes may encourage smaller homes, which increases supply (as you can build more of them); and demand won't change at all (since people will still spend 1/3rd of their income on rent, or more if they live in NY).
Government services are not something that are "used" in the normal sense of the word. Central Park needs to get mowed, street lights need to be lit, police and fire protection needs to be provided, etc. regardless of whether residents are there or not.
Property taxes are relatively low but they do exist. So that billionaire is probably still paying for a cop or a Sanitation worker, even if he steps in NY once a year. NYC takes almost 4% in tax, in addition to what the NY (state) takes.
The article notes that the properties are seen as a safe place to store money. Surely government services directly contribute to the increasing or at least stable value of these properties? Or do you believe that those condos would hold their value just as well if there were no police force in NYC?
> The article notes that the properties are seen as a safe place to store money.
But that isn't true. Real estate isn't that safe in the first place, and they are also throwing money away by not renting it. They'd do better in buying a commercial property and renting it out.
There is a phenomena of buying real estate in stable countries as a complicated bank account for wealthy people from unstable countries. It's like buying a pile of gold to them, except a house is harder to steal.
Vancouver is suffering from this with wealthy mainland chinese, leading to the second worst affordability ratio (housing price : average annual income) in the world. You see similar behaviors in condos in china itself.
It has very bad effects for the people who already live there, especially for the young and newly established. Younger people with better opportunities go away once they do the math and the cities eventually suffer brain drain. I would suggest a high long term unoccupied residence tax to avoid the problems of unused property in cities. Hopefully it will prod these people just a little bit to hire property management companies to avoid the tax and rent the places out.
Why do you feel real estate in Manhattan (especially at the locations mentioned) isn't that safe? Some of those places have been premium properties for almost 100 years.
The rest of New York took that approach. It sucks.
I live upstate, and pay about 2.5% of my home's value in taxes. Every time they give the cops another 5% raise, it has an immediate, measurable impact on my homes value. For older people, it makes it very difficult for them to live without assistance.
Income tax is a far more just system. Poor and elderly people pay almost nothing, and everyone else contributes regardless of whether they own property.
This is a great answer because it points out something that a lot of people either intentionally overlook or neglect to consider: taxes have different effects on different groups of people. Try sitting in on a highschool economics class some time -- full of statements like "Inflation can't be bad, can it? We consumers can pay our debt back in an amount that's worth less in buying power than the amount we borrowed!"
Another point that I forgot to mention is that states like New York are rapacious about the collection of income tax. Setting foot within the boundaries of New York State or New York City is a taxable event for the average absentee billionaires.
Hawaii has this system where property tax is reversely proportional to occupancy by owner, so full-time islanders end up paying very little, while people who buy high-end condos for crashpads or rentals.
If she is burdened by property taxes, it's because she's living in an extraordinarily valuable house. Since property taxes are in the neighborhood of 1% of value, and real estate prices in NYC go up by several percent per year, your sainted grandmother could borrow the money to pay the property taxes, against the property, and the increase in property value would more than pay the taxes.
Rich grandmothers are not actually a problem we need to solve.
I'm sorry but this is just wrong on every level imaginable.
> If she is burdened by property taxes, it's because she's living in an extraordinarily valuable house.
Or because she's been on a fixed income for several years. Or because she has a lot of medical bills, as most older folks do. Or because any of a myriad of other reason that would cause someone with a piece of land to not be swimming in a pile of gold coins.
> Since property taxes are in the neighborhood of 1% of value, and real estate prices in NYC go up by several percent per year,
I can't speak to the real estate prices or property taxes so I'll take you at your word here.
> your sainted grandmother
I think we can all go without sarcastic ad hominems against our grandmothers. Jesus Christ.
> could borrow the money to pay the property taxes, against the property, and the increase in property value would more than pay the taxes.
For me, this is just the pièce de résistance of this entire convoluted argument. The idea that someone who is having trouble paying property taxes should get a loan and pay the property taxes plus interest is just laughable.
> Rich grandmothers are not actually a problem we need to solve.
You're assuming that because someone owns property in NYC that they're rich, which is clearly not the case, especially if they've been there for half a century.
> You're assuming that because someone owns property in NYC that they're rich, which is clearly not the case, especially if they've been there for half a century.
You need to read what you wrote again. "Just because someone has a very valuable financial asset, doesn't make them rich." ORLY?
Let me quote from a news story:
"These listings, along with several others at the extreme low end of the market, are well below New York City's median sales price of $635,000, according to StreetEasy.com, which excludes foreclosures from its data. They're also below the bottom 10th of the city market, which has a median sales price of $160,000."
Even if your place is worth less than 95% of NYC properties, it's still worth $160,000.
Your argument is that someone who has a giant diamond but little liquid income shouldn't have to pay taxes on the diamond.
People who are having trouble paying property taxes are RICH people. Their problems go away immediately if they sell the giant asset they are holding onto, or if they even take a loan against its value (and payable when the asset is sold, perhaps when Grandma dies).
Does your argument work for all taxes? Should I just convert all my money into a single diamond and then claim I don't have any liquid cash to pay my income taxes?
"Oh, my diamond is too big to carve up to pay the taxman! Whatever shall I do!?!?"
Not intending to be harsh, but your grandmother could use the equity established in her property, and move to somewhere where the costs of living are within her means.
In cases where the property has appreciated so much that the increase in property taxes is a burden, surely there is a corresponding increase in equity to lessen the blow.
The "CA Prop 13" option pretty much makes newcomers finance existing landowners' property taxes - not my favorite option.
Prop. 13 is a disaster in another way. Because commercial buildings are higher-valued, it is now common for them never to be sold. They are just spun out as a separate entity, and that entity changes hands.
Since they are never sold, their property tax base never increases (re-assessment happens most often after a sale). So there has also been a net transfer of property tax burden from commercial to residential property.
More and more people are doing it too, I think. I was looking at property records, and a surprisingly large number of them were owned by various "trust"s .
> but your grandmother could use the equity established in her property, and move to somewhere where the costs of living are within her means.
Isn't keeping people in the city the whole reason you want to raise property taxes in the first place? Reduce the incentive of people to hold empty condos, so people can live in the city. So asking her to leave is the opposite goal to raising the real estate taxes.
That is why we have prop 13 in California, but that ends up either stripping tax revenue, or heavily taxing new migrants to be state (tech entrepreneurs, international people, etc) -- or, in California, both.
Buildings with modern working sprinkler systems are rarely an issue for firefighters. As for break-ins the concierge rarely let roving bands of hooligans in to trash places / squat.
Empty luxury condos are not the fire / squat hazard that abandoned warehouses, etc are. Nice try.
It's pretty likely that someone would notice a squat in a luxury condo.
As for city services the NYPD could probably greatly improve their budget by not unconstitutionally stopping and frisking people.
The city costs money to run regardless, and the people buying crashpads there still want it to be the NYC they bought into when they end up sleep there.
