Taylor Swift attends the 67th Grammy Awards on February 2, 2025 in Los Angeles, California.
Frazer Harrison | Getty Images Entertainment | Getty images
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A new impulse of the states to tax the real estate of the rich has caused a reaction between the corridors and potential buyers, who say that taxes punish the most important local speakers.
From tax increases in the second expensive houses in Rhode Island and Montana to the transfer tax proposed by CAPE COD in the homes of more than $ 2 million and the mansion tax governments, state and local, see a gold mine of income in the expensive properties of the rich.
“It's a blow to the face for people who only spend money here,” said Donna Krueger-Simmons, Mott & Chace Sotheby's International sales agent at Watch Hill, Rhode Island.
Tax increases are being driven by strictest state budgets and populist wrath due to housing costs. The states seek to compensate for the expected budget cuts of the new tax and expenses bill in Washington. At the same time, the real estate market has become a history of two buyers, with the middle class and the younger families fighting the houses, while the luxury real estate market prosperous of rich buyers of all in cash.
The solution for many states: tax the houses of the rich.
The new Rhode Island tax, nicknamed “Taylor Swift's tax” is among the most extreme. Popstar bought a beach house in the state Elite Hill community in 2013.
The measure imposes a new surcharge in the second houses valued at more than $ 1 million. For non -primary residences, or those that are not occupied for more than 182 days a year, the State will charge $ 2.50 for every $ 500 in value evaluated above the first $ 1 million. That position is in addition to existing property taxes and will be added to large increases for luxury houses in Newport, Watch Hill and other wealthy summer communities in the state.
Swift's house, for example, is evaluated at around $ 28 million, according to local real estate records. Your current property taxes are estimated at around $ 201,000 per year. The new charges will add another $ 136,442 to their annual taxes, taking their annual total to $ 337,442, despite the fact that the locals say they rarely visit.
Real estate corridors say that the increase is addressed to taxpayers who already contribute more. The rich, the owners of the second house, pay strong property taxes, but do not use many local services, since their main residences are in New York; Boston; Palm Beach, Florida; or other places. Their children generally do not attend local schools, and are rare users of the police, fire, water and other municipal services, since most remain for only 10 to 12 weeks a year.
“These are people who simply come here for the summer, spend their money and pay their fair tax,” said Krueger-Simmons. “They are penalizing just because they also live elsewhere.”
The runners and residents of a lifetime say that Newport summer residents, Watch Hill and other stations seasonal cities are economic engines for local companies, restaurants and hotels.
“You are only hurting people who support small businesses,” said Lori Joyal, from the Lila delman Compass office in Watch Hill. “You are chasing people who spend most of the money in these cities.”
Rhode Island is also walking for its transport tax on luxury real estate as of October. The real estate sales tax will be additional $ 3.75 for every $ 500 paid above $ 800,000 for a real estate purchase. At the same time, the steep state asset tax deteries many of the ultra rich to live there full time.
The runners say that some owners of the second house are considering selling and many possible buyers are stopping their purchases. While the fiscal increase is not expected to only lead to a significant wealth flight, Joyal said that potential buyers in Rhode Island are already looking for coastal cities in Connecticut as alternatives.
“It's always about elections,” he said. “At the end of the day it is how they can choose to spend their discretionary dollars. Connecticut has some beautiful coastal cities without some of these other high taxes.”
Archive – In this file photo of May 27, 2013, people pass through a house owned by Taylor Swift in the town of Watch Hill in Westerly, Ri
Dave Collins | AP
Montana has approved a similar tax. The influx of Californians and other rich newcomers who arrived at the state during Covid have brought up the housing prices and the growing resentment for gentrification. Meanwhile, the state income tax rate and the lack of a sales tax have left little space for income to increase the necessary increase in services.
In May, the State approved a two -level property tax plan, reducing rates for full -time residents and increasing taxes on second houses and short -term rentals. For primary residences and long -term rentals valued at or below the average price of the state housing, the tax rate will be 0.76%. The houses are worth more than that will face a staggered rate system of up to 1.9% at any value for four times the medium price.
The Montana Income Department expects the changes, which will begin next year, will increase the taxes of the second house by an average of 68%. The runners say that some buyers are waiting to see the tax invoices next year before making decisions about whether to buy or sell.
“I have heard of some buyers who have stopped to wait for the dust to settle and see what happens,” said Valerie Johnson, from Purewest Christie's International Real Estate in Bozeman, Montana.
Johnson said that, although legislators promoted the tax as the rich owners of the second home, it will also affect the lifelong premises that have investment homes and will rent them to obtain income.
“These are small businesses for many people,” he said.
Manish Bhatt, a senior policy analyst at the Tax Foundation, said the tax increases aimed at the rich owners of the second house can be politically popular, but rarely create a successful or efficient fiscal policy. The tax reform of real estate must be wide, instead of focusing on taxpayers who are indicated just because they do not live in a full -time community, he said.
“There is a capture to find income at this time,” he said. “But taxing the owners of the second house could have the opposite impact: deter people from possessing a second house or continuing to possess in those communities.”
While new taxes alone may not expel the rich, “we know that taxes are important for companies and people and could make people make the decision to buy in another near state,” Bhatt said.
Projected income of new taxes can also disappoint. When Los Angeles approved their so -called “Mansion Tax” in 2022, the proponents promoted income projections of between $ 600 million to $ 1.1 billion a year. The tax, imposed on real estate sales of more than $ 5 million, has only raised $ 785 million after more than two years, according to the Los Angeles Housing Department.
The highest interest rates that harm the real estate market have played a role, experts say. However, Michael Manville, urban planning professor at the UCLA Luskin School of Public Affairs, said that rich buyers and sellers also reduced transactions in response to the tax.
“The lowest income is a reason to worry because it suggests that the tax could be reducing transactions, which in turn can reduce housing production and property tax revenues,” he said.
