Levine’s analysis of the proposed pied-a-terre tax — Gov. Kathy Hochul’s proposed surcharge on second homes owned by the uber-wealthy in New York City, worth $5 million or more — outlined the challenges in not only implementing the program, if it is approved in the new state budget, but also drawing up to a half-billion dollars in new revenue for the Big Apple.
For one thing, the implementation of pied-a-terre could take months. It’s a new tax, so the Department of Finance would need to establish which properties and owners to bill, send notices, review appeals, and then add the charge to property tax bills.
The city needs to close a $5.6 billion budget gap by June 30 of this year. Levine projects the pied-a-terre tax wouldn’t be billed to property owners until November, at the earliest. How can the city rely upon money in June that it may not have for another three months, if not longer?
Then there is the matter of enforcing the tax to ensure everyone charged pied-a-terre pays it. Those facing this new surcharge will have their accountants find every loophole possible to get around it. To counter that, Levine said, the Department of Finance may need to boost its auditing staff to review leases, residency claims and appraisals to ensure that assessed values reflect true market values.
The other challenge is the state of the economy in a time of major economic headwinds facing the city and country. Wall Street has been largely immune to inflation, job losses, surging oil prices, and war — for now; the Dow Jones, NASDAQ and S&P 500 were all flirting with record highs when this editorial was published Monday morning. As a result, Wall Street executives who may be on the hook for pied-a-terre taxes are probably having a good year right now.
But where will Wall Street be come November, when the first pied-a-terre bills may go out? Where will the economy be after months of unmitigated inflation impacting every business and family in the country? The unknown answers to these questions not only impact the wealthiest of the wealthy, but also the city’s bottom line — because a sudden, dramatic downturn between now and the fall may substantially decrease the projected income from pied-a-terre.
Again, talking about taxing the rich is one thing. Imposing and enforcing the tax is another — and it is no guarantee that the revenue will be there when the city needs it the most.
All the more reason for Mayor Zohran Mamdani and City Council Speaker Julie Menin to play it safe and budget accordingly in this turbulent time. Don’t write a check for money you may have later, that may never come.
Spend wisely, cut waste, balance the books without gutting vital services. Menin says it can be done. Deep down, Mamdani knows it can be done. Let’s get through this difficult economy together.
Besides, if being prudent now means a budget surplus later if the worst outcomes are avoided, then the city will have the economic ability to do whatever it wants.