[Aurornis]

> If it turns out the uber-rich don't mind paying and this becomes a cash cow for the city, that creates incentives for the city to cater to them and try and get more uber-rich people to have second homes in the city.

The tax is reasonably small enough that I wouldn't expect a lot of wealthy people from divesting from their properties, but it's probably going to make them think twice about buying new properties.

That second-order effect is the important balancing act for any locality-based wealth tax. If you make the tax too high it starts discouraging the behavior you're taxing, which can paradoxically reduce overall tax revenue.

France discovered this the hard way when they implemented their first wealth tax: Many ultra-wealthy people moved their capital out of France to avoid the tax, which was suspected to have had an overall decreasing effect on tax revenue from that demographic. They replaced the wealth tax with a property tax, which probably played a large role in inspiring this pied-à-terre policy.

[jamiequint]

"If you make the tax too high it starts discouraging the behavior you're taxing, which can paradoxically reduce overall tax revenue."

I am generally against more taxes, but the structure of this one is quite good in terms of the incentives. If wealthy people who only live in the city part-time stay in hotels instead of buying second homes, the net effect should be to increase the cost of hotel rooms and reduce the cost of owned-housing. NYC charges nearly 10% tax on hotel stays, so recoups some of the cost there. Having property in your city mostly being occupied by people who live their full time, particularly when property is already very expensive, seems like a good thing overall.

[apparent]

> increase the cost of hotel rooms and reduce the cost of owned-housing

Reducing the cost of $5M+ homes will slightly help some wealthy people who live in NYC, and there will be a modest trickle-down effect into less expensive properties. But I thought the goal was to generate tax revenue from the taxes, which wouldn't happen to the extent they end up in the hands of NYC residents.

EDIT: apparently it hits all homes over $1M, which means it will hit more homes but also won't generate revenue to the extent the homes end up being owned by New Yorkers.

[jamiequint]

"I thought the goal was to generate tax revenue from the taxes, which wouldn't happen to the extent they end up in the hands of NYC residents."

You're right, I'm saying I think it is a good tax for reasons secondary to revenue. We all know NYC is going to squander the money, at least they might make housing slightly cheaper for the average New Yorker in the process.

[ethbr1]

* Not to forget that most $5M NYC homes could also be a larger number of less valuable homes

So this is also a developer / market incentive, if it actually changes demand.

[8note]

> stay in hotels instead of buying second homes, the net effect should be to increase the cost of hotel rooms and reduce the cost of owned-housing.

airbnb begs to differ?

the conversion goes from owned/rented housing to airbnb conversions

however, the slack is absorbed, and the airbnbs are gonna about match the actual need for how many ultra-rich people are actually in NY at a time

[leephillips]

Not in NYC. Airbnb is effectively outlawed by regulation there.

[queenkjuul]

Good news, Airbnb can't operate in NYC.

Here in Chicago, they're banned from certain wards

[MSFT_Edging]

I'm not sure why if you or I were to expatriate and let go of our US citizenship, we'd still be on the hook for taxes for (iirc) 15 years, but the ultra wealthy can get away with tax havens while remaining citizenship and reaping the benefits of protection by X state.

What prevents the tax following the offshoring attempts? Is it simply that the IRS doesn't have the manpower? or is there a legal loophole for avoiding paying your share that only works for the ultra wealthy?

[throwaway2037]

    > we'd still be on the hook for taxes for (iirc) 15 years

This is defintely not true. I did some light Google searches and I cannot anything. There is an exit tax, but only applies if your net worth exceeds 2million USD.

[MSFT_Edging]

Turns out it's an old law, if you expatriated between 2004 and 2008, and spent 30+ days in the US within 10 years of expatriation.

> Further, expatriated individuals will be subject to U.S. tax on their worldwide income for any of the 10 years following expatriation in which they are present in the U.S. for more than 30 days, or 60 days in the case of individuals working in the U.S. for an unrelated employer.

[beagle3]

IIRC, this law was a result of Ted Arrison giving up his US citizenship very shortly before death, saving a few billions for his heirs.

The law was hastily passed to discourage copycats while working on the exit tax law without haste.

[queenkjuul]

I thought US citizens are taxed on income (but not capital gains) even when outside the US? I had friends who had to file US income tax returns while living overseas

[throwaway2037]

US citizens regardless of their residency are responsible to pay taxes on all global income and assets. Thus, if you live in the US, but have a brokerage account in Bermuda or Hongkong (where there are no local capital gains taxes) you are still required to pay US federal taxes on capital gains from your overseas brokerage account. The same would be true if you lived in Bermuda or Hongkong.

[sandeepkd]

I think its a good idea in general to tax the second property for any country where housing is a struggle. Its usage based taxation so fair in some sense. Housing is somewhat of a critical asset for a normal safe life. Commercialization of housing properties creates a circular effect on the pricing, thereby increasing the cost of almost everything else.

[blactuary]

The goal of this isn't simply to raise revenue, it's also to discourage parking money in empty properties when it's one of the most expensive cities to live in and doesn't have enough housing

[throwforfeds]

I'm also wondering what effect it'll have on all the people that have been declaring their primary residence in Florida for tax purposes yet actually live up here in NYC a good amount of the time. My neighborhood in Brooklyn is filled with cars registered in Florida. If all of a sudden your pied-a-terre condo in Williamsburg is getting hit with $40k+/year in property taxes it might no longer make sense to try and move your residence to Florida to avoid city/state income tax.

[gruez]

>it's also to discourage parking money in empty properties when it's one of the most expensive cities to live in and doesn't have enough housing

Is that really needed when the homeowner vacancy rate is 1.3% in the New York-Newark-Jersey City MSA?

https://www.census.gov/housing/hvs/data/rates.html

[lux-lux-lux]

The actual vacancy rate is many times that, as properties are kept off market for a variety of reasons (one of which this tax directly addresses)

[gruez]

Why wouldn't it be captured? This is from the census, so it presumably captures units that aren't on the market.

[queenkjuul]

Lots of the highest-value units are famously empty. The "pencil skyscrapers" in particular were called out in the media.

[cyberax]

Expensive cities will never have enough housing. The cure is to discourage investment in them and force it into less dense cities.

[janalsncm]

They are expensive largely because of housing so your statement is a bit of a tautology.

Historically NYC housing used to be a lot more affordable before they stopped building, reducing supply relative to demand and thereby raising prices.

[Jblx2]

Has anyone tried to study how much NYC housing demand is due to having a large foreign-born population (something like 37%)?

https://www.huffpost.com/entry/new-york-city-immigrants_n_44...

[queenkjuul]

Do foreigners require more houses than Americans?

[postflopclarity]

.. yes? this is studied.

studies typically conclude that immigrant populations do contribute to housing demand (duh), but the labor supply they bring to services market (e.g. childcare, retail) lowers the cost of those services by a more-than-commensurate amount. so the total cost of living goes down for "natives."

[cyberax]

> They are expensive largely because of housing so your statement is a bit of a tautology.

Yes. And that's impossible to fix.

> Historically NYC housing used to be a lot more affordable before they stopped building, reducing supply relative to demand and thereby raising prices.

Demand will _always_ outstrip supply. And there's no such thing as "affordable housing", it's a contradiction like "hot liquid helium". If housing sells, then it's affordable for _somebody_.

What you're talking about is subsidized housing in some form. Like rent control or housing projects.

[IAmBroom]

> Demand will _always_ outstrip supply.

Economics 101 would beg to disagree.

> And there's no such thing as "affordable housing", it's a contradiction like "hot liquid helium". If housing sells, then it's affordable for _somebody_.

Incorrect. Housing can be sold to a buyer that won't use it for housing. Like the dog protecting the manger full of food it can't eat, affordable housing can be removed from the market by investors, tax vehicles, and so forth.

[dirtikiti]

No, the goal is to overhaul the property tax system.

This is going to raise property taxes for everyone.

The ultra wealthy can just pack up and move. It doesn't affect them in the slightest.

But in two years when the property tax overhaul is complete, the middle class will foot the bill. As per usual.

[nkohari]

Can you explain how that would happen? This tax is limited to second homes only.

[dirtikiti]

this is literally a cover to overhaul the property tax assessment system in New York.

https://www.msn.com/en-us/money/companies/new-york-passes-ma...

"While the tax seems large, experts say the city's antiquated assessment and valuation system dramatically undervalues properties, reducing the burden. City valuations can often be 10% or less of the true market value, they said.

Rather than overhaul the system immediately, the city will gradually update valuations – and the tax – according to the budget documents. Starting in the 2028-2029 tax year, the property values will be based on comparable sales. Since valuations will skyrocket, the tax rates will fall to compensate."

this is, at minimum, a 10% increase in ALL property taxes. And the people most affected will be the lower and middle class.

[ethbr1]

>> City valuations can often be 10% or less of the true market value

> this is, at minimum, a 10% increase in ALL property taxes

If they're ~10x'ing the erroneously low valuation to true them to market value, then that would be more than a 10% increase.

>> Since valuations will skyrocket, the tax rates will fall to compensate

But as the article points out, this is an expected outcome and will be blunted by subsequent tax rate decreases.

All things equal, undervaluing properties for tax purposes isn't fair, although it may be politically (corruptly) popular.

[dirtikiti]

>>But as the article points out, this is an expected outcome and will be blunted by subsequent tax rate decreases.

the tax rate decrease will be on the multi-million dollar homes.

not on the new property tax valuations of everything else.

[queenkjuul]

That literally has nothing to do with the pied-a-terre tax. The assessment process is not related to taxing second homes. Each can be done with or without the other.

[iririririr]

it will just make rent higher.

[WalterBright]

> If you make the tax too high it starts discouraging the behavior you're taxing, which can paradoxically reduce overall tax revenue.

The Law of Supply and Demand is not a paradox.

[aerhardt]

You could maybe somehow relate it to supply and demand dynamics, but the idea that that higher taxes can start reducing receipts after a certain point is widely credited to Laffer (although apparently there are signals of others saying similar things throughout the history of economics). The Laffer model displays an inverted U curve.

[WalterBright]

The Laffer curve is a result of the Law of Supply and Demand.

It's no different than increasing the price of X causes the sales of X to go down.

[aerhardt]

Classical supply and demand models do not show that increasing the price of x causes quantities to first go up then down after a certain inflection point…

You could probably make the relationship through utility rather or a proxy model (you can model anything with enough imagination in economics) but to call it “the result of” as if it is immediately related is not accurate. It is apparent at first sight when you compare the curves…

[tekne]

Wait... yes they do.

If I raise the price of my product, less people will buy it but I'll make more profit per-unit -- so the amount of money I make is an inverted U with price on the x axis and money on the y axis, and I should set the price at the inflection point.

[pydry]

Land value taxes don't discourage desirable behavior when raised.

Property taxes might discourage construction but if land values are high enough then property taxes approximate land value taxes.

Raising income tax on the other hand discourages working even when it is set very low. This is one which ought to be lowered if anything.

tl;dr it doesnt work the same way for every tax.

[rileymat2]

Are there good sources on income tax discouraging working? My rudimentary google searches are mixed, between it being a disincentive, and forcing people to work more for the same income.

[cucumber3732842]

>Land value taxes don't discourage desirable behavior

Are you serious? LVTs expressly incentivizes landlords to kick out "grandfathered in" developments and uses in favor of redevelopment and sale for that purpose.

But those grandfathered in developments and uses are exactly what made the place valuable in the first place and you need some amount of them to remain.

[zozbot234]

Redevelopment often mitigates housing scarcity in general, including for existing residents. They may have to move to a slightly smaller apartment within a generally much improved area, which usually leaves them better off. This is especially true for LVT, which amounts to a decrease in property tax for the improvements to land.

[senordevnyc]

They may have to move to a slightly smaller apartment within a generally much improved area, which usually leaves them better off.

Good luck selling this to voters.

[pydry]

I mean, I guess if you're a NIMBY who wants to inhibit the construction of more affordable housing that's a bad thing.

[cucumber3732842]

Nothing inhibits construction like creating a system where all the existing land owners stand to get taxed more if they allow development.

[pydry]

And the land value tax does the exact opposite of that.

If you sit on an underdeveloped plot of land in a high value location your tax bill will exceed your rental income.

The land is worthless to you. So you'll sell up to somebody who will make something of it.

[selfhoster1312]

> France discovered this the hard way when they implemented their first wealth tax

Citation needed (for a solid study, not right-wing propaganda from CNews/Libération). From a quick cursory look, it appears the French government had no problem raising taxes when the taxes were higher, and that the previous governments who reduced taxes for the rich setting blame on public debt have in fact increased public debt over and over. (disclaimer: i'm not an economist)

[aerhardt]

France's government expenditure is 57% of its GDP according to th OECD. It's probably an all-time record in the annals of global economic history in peacetime. It's more than the late Soviet Union spent around 1985-1990 according to the IMF / World Bank.

The 2025 deficit ran at around ~150 billion euros. The Zucman wealth tax would raise 25 billion in the most optimistic projected scenario (so, one sixth of the deficit at most). This is the very best case as projected by its proponents - there's a decent chance receipts would be significantly lower than that.

You're absolutely right that right wing parties did not, and almost certainly will not, solve any of these issues. Neither will a wealth tax. In my opinion, this is only solved in a bang.

[steveBK123]

I agree a lot of these things end in a bang at some point.

Western rich world boomers have gotten a great deal - unusually stable & high growth economies, relative housing abundance, and peace during their peak working life during which all sorts of retirement related benefits were introduced.

Unfortunately many of those benefits only work in a higher population growth, higher economic growth, lower retired lifespans world that no longer exists.