‘Taylor Swift Tax’ on high-end vacation homes spreads to more states

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A new pressure to tax wealthy real estates reacted to a reaction between brokers and potential buyers who say that taxes punished the most important local expenditures.

Cape Cod’s transfer tax on more than 2 million dollars of tax hikes in Rhode Island and Montana’s second houses in second houses, and La Mansion tax, state and local governments see an income gold mine in the expensive properties of the rich.

“A spank against people who spend money here.” He said.

Tax hikes are directed by the populist anger on tight state budgets and housing costs. States want to balance the budget cuts expected from the new tax and expenditure bill in Washington. At the same time, the housing market has become the story of two buyers, while middle -class and young families struggled to meet the houses, while the luxury housing market developed from all wealthy cash buyers.

Solution of many states: Tax the houses of the rich.

Rhode Island’s “Taylor Swift Tax” nicknamed the new tax is among the most extremes. In 2013, Popstar acquired a beach house in the distinguished Hill community of the state.

The measure brings a new additional fee of more than $ 1 million to the second houses. For non -Pirsi residences or for those who are not occupied for more than 182 days a year, the state will demand $ 2.50 for every $ $ 500 in the evaluated value of over the first $ 1 million. This accusation will provide great increases above the current real estate taxes and for luxury houses in Newport, Watch Hill and other good heels summer communities.

For example, Swift’s house was considered to be about 28 million dollars according to local real estate records. Existing real estate taxes are estimated to be approximately 201.000 dollars per year. New charges will add $ 136,442 to their annual taxes, and the locals say that they rarely visit, but they will bring the annual total to $ 337,442.

Real Estate brokers say the increase is aimed at the most contributing taxpayers. The second rich married people pay heavy real estate taxes, but do not use much local services than the primary residences are in New York; Boston; Palm Beach, Florida; Or other places. Their children usually do not go to local schools, and most of the years are only 10 to 12 weeks, they are rarely users of police, fire, water and other municipal services.

Krueger-Simmons, “These are the people who come here for the summer, spend their money and pay their fair share of taxes.” He said. “They are only punished for living elsewhere.”

Brokers and residents for a long time, Newport, Watch Hill and other seasonal coastal towns, summer residents are economic engines for local businesses, restaurants and hotels.

“You only harm people who support small businesses,” Lori Joyal of Lila Delman Compass Office in Watch Hill said. “You are chasing people who spend most of the money in these towns.”

Rhode Island also has the transportation tax on the luxury real estate since October. Real Estate Sales Tax will be an additional $ 3.75 for every $ $ 500 paid over $ 800,000 for a real estate purchase. At the same time, the state’s upright real estate tax determine most of the ultra -rich from living there full time.

Brokers pause some of the second hosts are planning to sell and many buyers buyers. Although the tax hike alone is not expected to lead to an important flight flight, Joyal said that the potential buyers in Rhode Island look at the coastal towns in Connecticut as an alternative.

“This is always about the elections,” he said. “At the end of the day, about how they can choose to spend their optional dollars. Connecticut has some beautiful coastal towns without some of these other high taxes.”

A tax -like tax was passed. The flow of California and other wealthy newcomers spilled into the state during Covid led to increasing anger against rising house prices and gentrification. In the meantime, the state’s low income tax rate and lack of sales tax has left a little space for income increases to address the necessary increase in services.

In May, the state passed a two -layer real estate tax plan that reduced rates for full -time residents and increased taxes in second houses and short -term rentals. The tax rate for the primary residences and the state’s median housing price or less valued for long -term rents will be 0.76%. The houses, which are more than that, will face a layer of up to 1.9% of any value up to four times the median price.

Montana Revenue Ministry expects the changes that will start next year to increase the second home taxes by an average of 68%. Brokers say that some buyers expect to see tax bills next year before making any decisions about purchasing or selling.

“I heard some of the buyers entering the brakes to wait for the dust to settle and see what would happen,” Purewest Christie’s Bozeman, Montana and Valerie Johnson said. He said.

Johnson said that while the tax laws were hitting the wealthy second landlords, he said he would have hit the indigenous people for a long time, who had investment houses and rented them for income.

“These are small businesses for many people,” he said.

Manish Bhatt, a senior policy analyst at the Tax Foundation, said that tax hikes for the second wealthy second hosts may be politically popular, but rarely create a successful or efficient tax policy. The real estate tax reform should be widely based instead of focusing on the taxpayers selected as they do not live in a full -time community.

“There is a grab to find income right now,” he said. “However, the taxation of the second landlords may be the opposite-to give up having a second home or to continue having these communities.”

Bhatt, new taxes alone may not eliminate the wealthy, “we know that taxes are important for businesses and individuals, and people may decide to buy in another state.” He said.

The income from new taxes may also be disappointed. When Los Angeles passed the so -called “mansion tax” in 2022, fans made income projections between $ 600 million to $ 1.1 billion per year. According to the Los Angeles Housing Department, tax on more than 5 million dollars of real estate sales, tax imposed over $ 5 million, more than two years after two years of 785 million dollars collected.

Experts say that higher interest rates that harm the housing market play a role. Nevertheless, Michael Manville, a Professor of Urban Planning at UCLA Luskin Public Relations School, said that wealthy buyers and sellers also reduce transactions in response to tax.

“Lower income is a reason to worry, because taxes can actually reduce transactions, which can reduce housing production and real estate tax income.” He said.