Vetting the Pied-à-Terre Tax

The economic damage to New York City from Mayor Zohran Mamdani’s and Governor Kathy Hochul’s pied-à-terre tax is in the spotlight amid escalating oversight efforts by the City Council. It’s telling, too, that Hizzoner is dodging accountability from the city’s elected legislators, refusing to defend in public the new tax. He faces a potential subpoena from the council. The rising tensions over the new tax come as a lawsuit against the levy is pending in state court. New York’s independent fiscal watchdog, the Citizens Budget Commission, which opposed the surcharge on second homes, is urging the council to take a look at the potential harm to the city from the new levy. The commission’s vice president for research, Ana Champeny, cautions that the tax, meant to bridge a gap in the city’s bloated budget, could have an adverse “impact on property values, transactions, supply, ownership patterns, and tax revenues.” Such investigative work by the city council, Ms. Champeny asserted, could help Albany lawmakers in the event that they essay a rewrite of the hastily-drafted tax law. Such findings could prove useful, too, if the courts either pause or reverse the levy. Research on the economic impact “would enable the Legislature to smartly adjust the policy if it generates unintended consequences,” Ms. Champeny said today in testimony to the council.Ms. Champeny suggested, too, that to appraise the extent of the new levy’s implications, the city would be wise to “evaluate the broader related impacts of changes in supply and ownership, not just on property taxes but on all revenues and City spending.” This has the ring of a tactful way of warning that the levy might be causing more trouble to the city and its economy than the leftists backing the tax anticipated.The nonpartisan budget commission “did not favor the pied-à-terre tax,” Ms. Champeny said, because “we believe there are better ways to stabilize the budget.” The watchdog group had in an earlier analysis cautioned that while such a tax “is appealing politically because it is levied on wealthy people with means to pay and nonresidents who do not vote,” it would be “problematic for several reasons.” The surcharge, per the commission, “makes New York City less attractive to nonresident property owners who make important economic contributions that should not be overlooked.” These second-home owners “pay property, sales, and other taxes; and, they use fewer city services than people who live here,” the watchdog averred. That means, in effect, that these property owners are in effect subsidizing public services for other New Yorkers.Mr. Mamdani and his camarilla could well shrug off the potential damage flagged by the budget commission. The damage posed by the pied-à-terre tax is to the city’s “luxury housing market.” That outlook is echoed by, say, Seattle’s mayor, Katie Wilson, who waved away concerns that wealthy residents could decamp the city because of higher taxes, saying: “the ones that leave, like, bye.” Such nonchalance is, the commission says, misguided.Harming the market for higher-end homes at New York, the commission reports, would “depress property values for residents and nonresidents alike.” This is not only a downside for owners of less expensive properties, the commission reckons. The possible harm to the housing market, the watchdog group says, makes “the expected revenue from the tax overly optimistic.” The estimates are already seen as being off by as much as a third.These economic woes won’t necessarily be at the forefront when a state judge, Wayne Ozzi, hears arguments later this month over the flawed rollout of the tax law. Yet Judge Ozzi could well agree with Ms. Champeny’s view that the tax law was rushed through the legislature with “insufficient vetting.” Such considerations speak to the need for at least a delay in the state’s implementation of the pied-à-terre tax, barring a reversal of this harmful legislation.

Vetting the Pied-à-Terre Tax

Vetting the Pied-à-Terre Tax

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