Gotham Gazette http://www.gothamgazette.com/component/tags/tag/92 Mon, 23 Oct 2017 07:46:27 +0000 Joomla! - Open Source Content Management en-gb webmaster@gothamgazette.com (Webmaster) Budget Watchdogs Question De Blasio’s 'Mansion Tax' http://www.gothamgazette.com/?id=6830:budget-watchdogs-question-de-blasio-s-mansion-tax http://www.gothamgazette.com/?id=6830:budget-watchdogs-question-de-blasio-s-mansion-tax de blasio mansion tax

De Blasio pitches his mansion tax (photo: Michael Appleton/Mayor's Office)


Budget watchdogs have expressed concern that Mayor Bill de Blasio’s “mansion tax” proposal, which would impose levies on real estate transactions above $2 million, may be misguided or even unnecessary.

De Blasio made a last-minute trip to Albany on Wednesday to rally with Democratic lawmakers and progressive advocates in favor of a number of proposals currently being considered in state budget negotiations. The mayor’s chief concern, however, was the mansion tax, a proposal he has floated for years and revived this budget season as a tool to subsidize affordable housing for seniors.

The proposal would impose a 2.5 percent tax on buyers who purchase property in the city at more than $2 million, raising an estimated $336 million next year, according to the mayor. That funding would then be used for a new Elder Rent Assistance program to provide $1,300 in monthly assistance to 25,000 seniors, the mayor said at his State of the City speech in February. In order to implement the tax, the city needs state approval, which is unlikely given opposition to new taxes from the Republican majority in the state Senate as well as Governor Andrew Cuomo, a Democrat who is fiscally moderate and habitually opposed to de Blasio proposals.

The Wednesday rally at the state Capitol was one stop in something of a barnstorm by de Blasio, who has been pushing the mansion tax plan among seniors, including at two senior center stops on Thursday. The mayor has cited the necessity of the tax revenue to provide the additional rent subsidies to older New Yorkers who fit certain age and income guidelines.

[Related: In Albany, De Blasio and Democrats Push ‘Mansion Tax’]

But fiscal experts question whether the city really needs a new tax to raise that revenue and, if so, whether a transactional tax is the best way to do it.

“This could be a good idea in the context of general property tax reform and other tax reform,” said Nicole Gelinas, senior fellow at the Manhattan Institute, a conservative think tank. “But it's not a good idea as a revenue raiser."

Gelinas noted that the city already charges a mortgage tax, which she called “a tax on people who can't pay cash for an apartment.” “If we wanted to have a more progressive tax on just the purchase of more expensive properties, the money should go to reducing or eliminating mortgage taxes or other property taxes," she added.

That’s not what the mayor is proposing. Instead, Gelinas pointed out, de Blasio is attempting to raise revenue for a new program through a new tax, something mayors don’t usually do unless they face a sharp revenue crunch. “The city is not exactly starved for revenue right now,” she said.

Although the city is feeling the early effects of an economic slowdown, revenues and reserves are still robust after years of sustained growth. Available monies could be used to prioritize affordable senior housing, Gelinas said. Yet, as he once did with his universal pre-kindergarten program, de Blasio is insisting that the way to fund his senior assistance program is through a new tax.

The mansion tax also faces opposition at home from allies of de Blasio. Manhattan Borough President Gale Brewer told Gotham Gazette that she opposes the $2 million threshold for the tax since it would have an outsize impact in Manhattan, where property prices are far greater than the other boroughs. She would prefer a $5 million threshold. “Manhattan should not be the cash cow for the rest of the boroughs,” she said last month.

A report by the nonpartisan Independent Budget Office, prompted by Brewer, looked at property sales from the last three years and found that between 2014 and 2016, 8 percent of homes sold citywide were priced at $2 million or more. Of those, 86 percent were in Manhattan.

[Related: De Blasio Faces Local Questions About ‘Mansion Tax’ Plan]

In response, the de Blasio administration points out that it is a “marginal tax for incremental sales price over $2 million,” meaning that only the price above the $2 million would be taxed at the 2.5 percent. Those purchasing homes closer to the $2 million threshold would be paying very little in added tax.

There are also concerns among the real estate industry about the proposal’s effect on sales, at a time when Brooklyn brownstones can cross the $2 million threshold. The de Blasio administration dismisses that concern due to the incremental nature of the tax.

Carol Kellerman, president of the nonpartisan Citizens Budget Commission, believes the mayor hasn’t made a clear case for the mansion tax. “If the goal is to impose higher taxes on people perceived to be wealthy, there are ways to do it through the income tax structure,” she said in a phone interview. “The mayor’s not proposing this as a form of budget relief or as necessary for budget needs.”

Kellerman also emphasized the “volatile” nature of a transactional tax, which would depend on the ups and downs of the real estate industry and also have a “distortive impact” on the market and change behavior. “If there’s a need to raise that amount of revenue, a transfer tax of this nature is not a reliable source of revenue,” she said.

She also pointed out that the mayor has already allocated billions in the city’s capital plan for affordable housing, so the need for a separate tax for senior housing doesn’t necessarily pass muster.

Given opposition from state Senate Republicans, the mansion tax may be dead on arrival in Albany. De Blasio has argued, including in Albany Wednesday, that he’s heard that before about proposals, such as the $15 minimum wage. Gelinas was blunt about mansion tax prospects. "I don't think it's going to go anywhere," she said.

A spokesperson for the de Blasio administration refuted both Gelinas and Kellerman’s concerns, stressing that property tax reform is a larger undertaking and that the mansion tax is necessary when considering how the proposed federal budget will impact affordable housing and seniors in particular.

The spokesperson also pointed out New York’s existing state mansion tax, which is 1 percent for properties above $1 million, and cited jurisdictions around the world that have used similar taxes to fund policy goals from rising housing markets.

A spokesperson for another budget watchdog, city Comptroller Scott Stringer, declined to comment on the mansion tax proposal. The comptroller has not released any fiscal analysis of the proposal.

At the Wednesday rally in Albany, de Blasio reiterated the need for the mansion tax. “Here’s the bottom line, right now, there are seniors struggling to get by in New York City and all over New York State,” he said. “There are seniors struggling to get by because so many of them are on fixed incomes. So many of them don’t have a way to get more income but the cost of housing keeps going up...We owe it to them to get it right, and asking the wealthy to pay their fair share so our seniors can have decent life is a thing we call common sense.”

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by Samar Khurshid, City government reporter, Gotham Gazette
     

Read more by this writer.

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Budget Watchdogs Question De Blasio’s 'Mansion Tax' Thu, 23 Mar 2017 04:00:00 +0000
De Blasio Faces Local Questions About ‘Mansion Tax’ Plan http://www.gothamgazette.com/?id=6773:de-blasio-faces-local-questions-about-mansion-tax-plan http://www.gothamgazette.com/?id=6773:de-blasio-faces-local-questions-about-mansion-tax-plan de Blasio speech dining room gracie

Mayor de Blasio (photo: Edwin J. Torres/ Mayor's Office)


A report released by the city Independent Budget Office has raised questions about the potential effects of the so-called “mansion tax,” a proposed part of Mayor Bill de Blasio’s affordable housing strategy that would levy a 2.5 percent surcharge on the sale price over a threshold of $2 million for residential properties.

De Blasio put forward a version of the mansion tax proposal, which requires approval by the State Legislature and Governor Andrew Cuomo, in mid-2015. It failed to gain traction then. The mayor presented the current updated form at an Albany legislative state budget hearing in late January and reiterated it at his State of the City address February 13.

The mayor has said that he hopes the revenues from the tax, estimated by his Office of Management and Budget at $336 million in fiscal year 2018, will be used to subsidize rents for seniors.

The IBO report shows that about 8 percent of citywide home sales between 2014 and 2016 carried price tags of $2 million or more; and of those sales, 86 percent were for properties in Manhattan.

Manhattan Borough President Gale Brewer had requested that IBO examine the impact the tax would have on her constituency. Often in agreement with de Blasio, a fellow Democrat, Brewer told Gotham Gazette that she is opposed to the mayor’s mansion tax proposal.

“Manhattan should not be the cash cow for the rest of the boroughs,” Brewer said during a phone interview, adding that she would be “much more comfortable with [a threshold of] $5 million and not $2 million.”

At the State of the City speech, the mayor told his constituents to “ask [state legislators] if you think someone selling a home for more than $2 million can afford a little bit for senior citizens.” The tax would be paid by the buyer, according to de Blasio’s plan.

Brewer also raised concerns that mansion tax revenues would not be guaranteed to go to rent subsidies. “Any tax that has been enacted then has to be allocated. It could go to seniors, or it could go to homeless services, or it could go to anything,” she said.

Asked if she would publicly oppose and testify against the tax if given the opportunity, Brewer said she would. She said she had not been in touch with the mayor or his staff about the mansion tax specifically, but had heard from constituents concerned about the measure’s effects.

In emailed comments expanding on the report, IBO Chief of Staff Doug Turetsky said there were arguments for and against the tax. A possible issue is the specter of a price cliff: “suddenly you will probably have a lot of sales priced just under the threshold for the mansion tax.”

However, he touted the proposal’s potential to level the playing field, as both co-ops and high-end residential sales paid in cash or with foreign financing are not subject to the city’s existing mortgage recording tax. “As a result, purchasers of a comparatively moderate priced home will likely pay both the city’s mortgage recording tax and real property transfer tax, while many buyers of the city’s most expensive residential properties will only pay the transfer tax,” he said.

Along with skepticism from Brewer, de Blasio is facing a long road to mansion tax passage in Albany, where both Cuomo, a fellow Democrat, and the state Senate Republican majority are philosophically opposed to new taxes. Senate Majority Leader John Flanagan has said his conference is interested in cutting taxes, and he is facing a Cuomo proposal to extend the state’s “millionaire’s tax.”

De Blasio has said that recent progressive victories indicate nothing is impossible to see through Albany if there is enough support. The mayor also argues the city needs the mansion tax revenue to bolster his affordable housing plan, especially for seniors, though the city has been rapidly adding to its budget under the mayor without additional taxes, given revenues have been strong amid a booming city economy.

“I don’t think the mayor has thus far made the case why the tax is needed for any particular agenda he wants to pursue,” said Carol Kellerman, president of the Citizens Budget Commission, adding that “it would seem to us that the mayor and the [City] Council are able to fund anything they need $330 million for” out of the already expanded, $84.7 billion budget the mayor has proposed for fiscal year 2018.

Melissa Grace, a spokesperson for the mayor’s office, dismissed the idea of a price cliff, arguing that, since the tax would only apply for the price over $2 million, “that’s not going to affect any buyer or seller’s behavior.” She also pointed out that the average home purchase affected by the tax would be $4.5 million, an argument the mayor also raised at an unrelated press conference this week when Gotham Gazette asked about his tax plan.

In response to Brewer’s concern of the money being used for other purposes, Grace said that according to the city’s proposal, the funds would go specifically to the recently announced Elder Rent Assistance program and could not be used for anything else.

Asked at a Tuesday press conference about previous statements that the mansion tax was justifiable given tax cuts for the wealthy the mayor is anticipating from Washington, D.C., the mayor said that President Donald Trump “has been salivating for the opportunity to reduce corporate taxes and taxes on the wealthy...So I think it’s a really, really good betting assumption there will be tax cuts for the wealthy and the corporations.”

The mayor added that, even if a federal tax cut does not materialize, “I still think the mansion tax makes sense...Someone who’s buying a $4.5 million home can afford to spend a little bit more.”

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by Felipe De La Hoz, Gotham Gazette
     

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De Blasio Faces Local Questions About ‘Mansion Tax’ Plan Thu, 23 Feb 2017 05:00:00 +0000