NY weighs a real estate tax as pied-a-terre tax hits a roadblock
ALBANY — The proposed pied-a-terre tax that would target foreign and out-of-state owners of Manhattan apartments to fund mass transit repairs is facing a roadblock and could be replaced by a real estate transfer tax for all high-end sales, state officials said Tuesday.
The real estate transfer, or an increase in a similar existing tax, are being considered to raise funds that won’t get tangled in city assessment issues and complex foreign ownership rights under a pied-a-terre tax, state officials said.
“There are a number of high-end real estate taxes called pied-a-terre, but you could do it a number of ways,” Gov. Andrew M. Cuomo said Tuesday, specifically identifying a real estate transfer tax.
State officials said the transfer tax would aim at the same target as a pied-a-terre tax: Apartments and condominiums costing $5 million or more, many of which are owned by wealthy business people from abroad. One of the differences could be that the pied-a-terre tax would tax the same properties every year while the real estate transfer tax would tax only sales, state officials said.
Cuomo wouldn’t disclose critical details still under negotiations, including how much the transfer tax on sales would be, or if the state tax would be increased in New York City, in the Metropolitan Transportation Authority region, or statewide.
Assembly Speaker Carl Heastie said a transfer is easier to administer and can avoid any “chicanery” of owners, who could argue that their luxury condo was a primary residence, which wouldn’t be subject to the pied-a-terre tax.
“It’s not as easy to play games if you do a straight transfer tax,” said Heastie (D-Bronx). He said the tax could raise $300 million to $400 million a year to fund improvements to the subway as well as for Metro North and the Long Island Rail Road.
Mayor Bill de Blasio said the new funding stream reflects positive momentum and should be ready to be included in a state budget agreement, which is due by Monday.
“The big picture is this is a newer idea in our discussions, but it’s a productive one,” de Blasio said while lobbying in the Capitol on city budget issues. “We’ve never had the stars align like this,” he said. “There is no question this will be a big enough plan.”
Although details continue to be worked out between Cuomo and legislative leaders in closed-door negotiations, the late switch in major funding streams prompted some concerns Tuesday.
“We seem to have lost our thread here,” said E.J. McMahon of the fiscally conservative think tank Empire Center for Public Policy.
He said the tax proposal comes at a time when Cuomo is blaming a federal tax law for driving the wealthiest New Yorkers, who already pay a state millionaire’s tax, out of state.
“If one was cynical, one could see it as a ploy by the governor and speaker to say, ‘Pick your poison,’ " McMahon said of the politically powerful real estate lobby. “The pied-a-terre tax is this enormously appealing concept on the surface, but the more you look at it, the gnarlier it gets.”
Scott Reif, spokesman for Senate Minority Leader John Flanagan (R-East Northport), said the budget shouldn’t take on any new taxes or fees.
Sen. Brad Hoylman (D-Manhattan), who pushed for the pied-a-terre tax, blamed the late change on the politically powerful real estate lobby.
“The real estate lobbyists who say that the rich won't buy apartments with a pied-a-terre tax deserve an Oscar for their acting,” Hoylman tweeted. “For a property with a market value of $6 million, the annual tax would be an additional $5,000.”
“I’d rather see a pied-a-terre tax,” said Sen. James Skoufis (D-Woodbury) in an interview. “It doesn’t seem like any deterrent to me.”
"The State Legislature should be looking at both pied-à-terre and an enhanced Real Estate Transfer Tax on properties valued at over $5 million. They need not be mutually exclusive,” said Ron Deutsch of the labor-backed Fiscal Policy Institute. “Let’s face it, if you can afford to buy a Manhattan condo for $5 million . . . in cash, you can afford to pay a little more in tax.”