The current mansion tax was put in place in 1989. At that point the parameters for the mansion tax more closely tied to one’s definition of a mansion. In 1989, any home sold for greater than $1 million the buyer was charged 1% of the sale price.
For example: If the apartment’s selling price was $1.25 million, the tax would be $12,500. At the time the law was put in place, $1 million was a pretty good inflection point for mansion consideration.
Mayor DeBlasio wanted to revise the mansion tax in 2015. His proposal, at that time, was a bump in the threshold from $1 million to $1.75 million. In conjunction with the threshold change, he also proposed moving the tax rate from 1% to 1.5% on real estate sales over $5 million. This was a net tax winner resulting in a $200 to $300 million windfall to the City and also an opportunity for him to win votes with his constituency. Unfortunately, for Mayor DeBlasio, this proposal failed.
In 2017, Mayor DeBlasio is running a similar mansion tax proposal up the Albany flagpole. He has revised his plan. Property sold over $1 million would continue to be charged a tax of 1% while 2.5% would be charged on the margin for property over $2 million.
For example: If the apartment’s selling price was $3 million, the original tax would be $30,000. The proposed tax would be an additional $25,000 ($3 million – $2 million = $1 million times 2.5%) or a total of $55,000.
Mayor DeBlasio’s new mansion tax proposal would need approval from the state senate, assembly and governor’s office. With the current makeup of the senate this proposal will probably never see the light of day.
Although there are many social inequalities that need to be addressed in the City, placing significant tax burdens on one of the main financial drivers for the City should be debated and reasoned with plenty of collective thought. The law of unintended consequences always looms large in a City like New York and significant decisions around economic drivers should be properly vetted with the experts.