>There’s a lesson here for cities and states that are considering raising taxes on their wealthiest residents: The specific type of tax matters. The key is to design it around something the rich don’t want to give up—such as their home in the most economically and culturally important city in the world—not something they can easily avoid by simply changing their tax residence.
>For a long time, academic research said that the rich don’t move because of taxes. That used to be true because the rich had no real choice. Their businesses were in New York or San Francisco or, in the case of Jeff Bezos’s Amazon and Howard Schultz’s Starbucks, in Seattle, and they had to be near them. But digital technology, and especially the successful experiment in remote work during the pandemic, severed the bond between where a business is and where the owner lives.
>Recent years have seen a parade of billionaires, including Bezos, Schultz, Ken Griffin, Larry Page, and Sergey Brin, leaving blue cities for the low taxes, warm weather, and lifestyle of Miami. Florida makes this easy because it has no real residency requirement. The wealthy simply declare a Florida home as a homestead, and as long as they don’t spend more than the threshold number of days in their other homes—in New York, Los Angeles, Aspen, the south of France—they are Florida residents for tax purposes.
>This is what Miami and Palm Beach and a handful of other places are becoming: lifestyle tax havens, which offer sunshine, great nightlife, and an ideal place to dock a yacht, as well as tax advantages. Places for the rich, and, more and more, for the rich alone. Meanwhile, an exodus of the less advantaged, the working classes, and the merely affluent has begun.
>The importance of lifestyle helps explain why a tax on second homes might be the one kind of tax that the super-rich—like my billionaire acquaintance—will grudgingly tolerate. The pied-à-terre tax is unlikely to chase many people away, because it applies to a fixed asset, such as a house, condo, or co-op. The only way to get around the tax is to sell the asset. But that asset is also their home in a place where they really want—and, in many cases, need—to be, and many wealthy people would rather hang on to it.
>The amounts involved are also smaller than income or wealth taxes. New York City’s proposal is [estimated](https://comptroller.nyc.gov/reports/the-pied-a-terre-tax-and-its-potential-revenues/) to raise up to $500 million in annual revenue. That’s real money, but a fraction of what income or wealth taxes cost the ultra-wealthy. If Bezos had still been living in Seattle when he off-loaded Amazon stock in 2024, his Washington State capital-gains-tax bill would have come to about $600 million.
ControversialQuerier on
> The key is to design it around something the rich don’t want to give up
One aspect of income tax discussion that I don’t believe translates well to the pied a tierre discussion is the idea of people leaving if taxes get too high. I acknowledge that the article mentions how studies show this doesn’t happen regardless, but even if it did, is that not the point?
Even if it’s true that someone not living in the state isn’t consuming local resources (which, in theory, may offset their lower contributions), it’s possible that a consumer of local resources still provides a higher net positive by actively contributing to the local economy.
In other words: Is it possible that the goal *is* to find something they want to give up?
Worth-Wonder-7386 on
While you can move your wealth around, you cant just move your new york apartment to a tax haven.
Taxing properties is one of the most efficient ways to tax wealth.
I think it makes sense to have a seperation between primary and secondary residence and also a progressive tax to gain acceptance, but I am not sure they make so much sense exonomically as just a flat rate on property values.
khalid-khkhlhlh on
Goddamn paywall.
Anyway from what I read about the mayor of New York, Zohran Mamdani, he seems to have those tax policies.
– He wants to tax second houses.
It’s not very helpful. The housing crisis is a result of the private sector refusing to build enough houses for people to protect the price of houses. This cannot be solved without having a housing public sector.
Edit: Okay, I get it now, he’s only grounding the requirements for being taxed on house ownership, so that they can’t avoid taxes by moving and travelling to other states. That’s what pied-à-terre tax is about. My mistake. Took me a while to understand.
– He wants to raise corporate taxes.
It’s a bad idea. Corporate taxes affect small corporations more than big corporations. He should tax capital gains instead.
– He wants to tax incomes much more.
Now that is actually helpful. And it should be much more than the current proposals. But one step at a time.
BygmesterFinnegan on
Wouldn’t simply taxing spending ensure that everybody, rich & poor, pays a reasonable share? Thank God I’m on Reddit because it won’t take long for somebody to comment about how wrong I am but I would love to find out why that’s not feasible.
AreMarNar on
Isn’t the solution to capital flight taxing something that can’t be moved? Property fits the bill there. But we have a housing crisis, so we don’t want to disincentivize building, so exempting improvements could help there.
RedditReader4031 on
There isn’t a lesson for other cities and states here. You can count on one hand the number of places that have this kind of draw on the wealthy. And the idea of taxing non residents higher has long existed. Look at airport rental car fees. Look at hotel taxes. And so on.
wounderfulwaffles on
Does this work if houses are put in trusts? How would this work for property management companies.
I have some acquaintances that don’t “own” any of the three houses they travel to throughout the year. As far as I know, this is common for people with wealth in the US
Flimsy-Eye-4406 on
Extra tax for luxury second homes is a win. If the owner decides to sell, either someone else pays the tax or the new owner lives there, pays regular tax and contributes to the community.
A community near me has a primary residence rate of around 20-30 %. It’s weird. It drives home prices up and people buy as investment not to live. People don’t live there – they just work there. It changes things. It’s kinda like if people bought tables at a restaurant and pay a fee once a year to keep it but only eat at their table a few times a year. Needs to stop.
Johnnadawearsglasses on
I agree with this. Unless it’s absolutely punishing, I don’t see ever selling it. NYC RE has always been a great investment and it’s a great place to visit from time to time because it’s so unique
TGAILA on
>There is also a harder truth underneath the political rhetoric. Blue cities cannot keep taxing their way out of their budget problems. The differentials between high-tax and low-tax states are now too large, and the mobility of the rich too real, for that playbook to keep working.
Florida feels like a paradise for the wealthy when it comes to taxes. Regarding taxing the rich, the mansion tax in LA that’s meant to fund affordable housing hasn’t really made a difference. CA has poured billions into trying to address homelessness, but unfortunately, the situation has only worsened. And this one time wealth tax to fund healthcare will follow the same path. New York is going in the same direction.
naththegrath10 on
Probably because it’s taxing property they don’t actually live in the first place. Also, the entire idea that if you tax the rich they will flee and been proven to be a myth.
12 Comments
Excerpts:
>There’s a lesson here for cities and states that are considering raising taxes on their wealthiest residents: The specific type of tax matters. The key is to design it around something the rich don’t want to give up—such as their home in the most economically and culturally important city in the world—not something they can easily avoid by simply changing their tax residence.
>For a long time, academic research said that the rich don’t move because of taxes. That used to be true because the rich had no real choice. Their businesses were in New York or San Francisco or, in the case of Jeff Bezos’s Amazon and Howard Schultz’s Starbucks, in Seattle, and they had to be near them. But digital technology, and especially the successful experiment in remote work during the pandemic, severed the bond between where a business is and where the owner lives.
>Recent years have seen a parade of billionaires, including Bezos, Schultz, Ken Griffin, Larry Page, and Sergey Brin, leaving blue cities for the low taxes, warm weather, and lifestyle of Miami. Florida makes this easy because it has no real residency requirement. The wealthy simply declare a Florida home as a homestead, and as long as they don’t spend more than the threshold number of days in their other homes—in New York, Los Angeles, Aspen, the south of France—they are Florida residents for tax purposes.
>This is what Miami and Palm Beach and a handful of other places are becoming: lifestyle tax havens, which offer sunshine, great nightlife, and an ideal place to dock a yacht, as well as tax advantages. Places for the rich, and, more and more, for the rich alone. Meanwhile, an exodus of the less advantaged, the working classes, and the merely affluent has begun.
>The importance of lifestyle helps explain why a tax on second homes might be the one kind of tax that the super-rich—like my billionaire acquaintance—will grudgingly tolerate. The pied-à-terre tax is unlikely to chase many people away, because it applies to a fixed asset, such as a house, condo, or co-op. The only way to get around the tax is to sell the asset. But that asset is also their home in a place where they really want—and, in many cases, need—to be, and many wealthy people would rather hang on to it.
>The amounts involved are also smaller than income or wealth taxes. New York City’s proposal is [estimated](https://comptroller.nyc.gov/reports/the-pied-a-terre-tax-and-its-potential-revenues/) to raise up to $500 million in annual revenue. That’s real money, but a fraction of what income or wealth taxes cost the ultra-wealthy. If Bezos had still been living in Seattle when he off-loaded Amazon stock in 2024, his Washington State capital-gains-tax bill would have come to about $600 million.
> The key is to design it around something the rich don’t want to give up
One aspect of income tax discussion that I don’t believe translates well to the pied a tierre discussion is the idea of people leaving if taxes get too high. I acknowledge that the article mentions how studies show this doesn’t happen regardless, but even if it did, is that not the point?
Even if it’s true that someone not living in the state isn’t consuming local resources (which, in theory, may offset their lower contributions), it’s possible that a consumer of local resources still provides a higher net positive by actively contributing to the local economy.
In other words: Is it possible that the goal *is* to find something they want to give up?
While you can move your wealth around, you cant just move your new york apartment to a tax haven.
Taxing properties is one of the most efficient ways to tax wealth.
I think it makes sense to have a seperation between primary and secondary residence and also a progressive tax to gain acceptance, but I am not sure they make so much sense exonomically as just a flat rate on property values.
Goddamn paywall.
Anyway from what I read about the mayor of New York, Zohran Mamdani, he seems to have those tax policies.
– He wants to tax second houses.
It’s not very helpful. The housing crisis is a result of the private sector refusing to build enough houses for people to protect the price of houses. This cannot be solved without having a housing public sector.
Edit: Okay, I get it now, he’s only grounding the requirements for being taxed on house ownership, so that they can’t avoid taxes by moving and travelling to other states. That’s what pied-à-terre tax is about. My mistake. Took me a while to understand.
– He wants to raise corporate taxes.
It’s a bad idea. Corporate taxes affect small corporations more than big corporations. He should tax capital gains instead.
– He wants to tax incomes much more.
Now that is actually helpful. And it should be much more than the current proposals. But one step at a time.
Wouldn’t simply taxing spending ensure that everybody, rich & poor, pays a reasonable share? Thank God I’m on Reddit because it won’t take long for somebody to comment about how wrong I am but I would love to find out why that’s not feasible.
Isn’t the solution to capital flight taxing something that can’t be moved? Property fits the bill there. But we have a housing crisis, so we don’t want to disincentivize building, so exempting improvements could help there.
There isn’t a lesson for other cities and states here. You can count on one hand the number of places that have this kind of draw on the wealthy. And the idea of taxing non residents higher has long existed. Look at airport rental car fees. Look at hotel taxes. And so on.
Does this work if houses are put in trusts? How would this work for property management companies.
I have some acquaintances that don’t “own” any of the three houses they travel to throughout the year. As far as I know, this is common for people with wealth in the US
Extra tax for luxury second homes is a win. If the owner decides to sell, either someone else pays the tax or the new owner lives there, pays regular tax and contributes to the community.
A community near me has a primary residence rate of around 20-30 %. It’s weird. It drives home prices up and people buy as investment not to live. People don’t live there – they just work there. It changes things. It’s kinda like if people bought tables at a restaurant and pay a fee once a year to keep it but only eat at their table a few times a year. Needs to stop.
I agree with this. Unless it’s absolutely punishing, I don’t see ever selling it. NYC RE has always been a great investment and it’s a great place to visit from time to time because it’s so unique
>There is also a harder truth underneath the political rhetoric. Blue cities cannot keep taxing their way out of their budget problems. The differentials between high-tax and low-tax states are now too large, and the mobility of the rich too real, for that playbook to keep working.
Florida feels like a paradise for the wealthy when it comes to taxes. Regarding taxing the rich, the mansion tax in LA that’s meant to fund affordable housing hasn’t really made a difference. CA has poured billions into trying to address homelessness, but unfortunately, the situation has only worsened. And this one time wealth tax to fund healthcare will follow the same path. New York is going in the same direction.
Probably because it’s taxing property they don’t actually live in the first place. Also, the entire idea that if you tax the rich they will flee and been proven to be a myth.