New Tax Proposal from Governor Hochul
New York Governor Kathy Hochul, a Democrat, is now concentrating on imposing taxes on affluent individuals.
She has recently introduced a new pied-à-terre tax, which she describes as an issue of “fairness.” This tax would target non-resident owners of luxury properties in New York City and marks a notable shift in her stance, as she had previously dismissed a similar proposal from Mayor Zoran Mamdani.
Yet, while her intentions may sound appealing politically, the policy exemplifies how populist taxation can negatively impact investment, disrupt housing markets, and ultimately harm urban areas.
Albany’s creativity in devising new tax methods is unmatched.
“Those who benefit from our cities without residing here full-time should help cover our cities’ operational costs, such as public safety, parks, amenities, roads, and subway systems,” Hochul stated in a recent video.
She further asserted, “We believe this will safeguard working New Yorkers and ensure that anyone with a New York City address has a stake in the city’s ongoing success.”
However, while Hochul may be attuned to political pressures, her grasp on economic reality appears less sound.
Non-resident property owners in New York City already incur substantial taxes—between $45,000 and $65,000 on a $5 million pied-à-terre—yet they derive minimal benefits from the services funded by these taxes. Additionally, residents must also contend with sales taxes and various fees.
Moreover, businesses run by non-residents contribute significantly to the city’s budget.
This pied-à-terre tax is fundamentally flawed—it’s arbitrary, distorts market dynamics, and depends on status. This could lead to valuation discrepancies and attempts to keep properties just below the $5 million tax threshold.
If it only applies to non-residents, it could encourage tax avoidance through changes in residency status or ownership manipulation.
For high-end real estate, such a tax could depress property values and, consequently, property tax obligations. However, the situation becomes distorted when the future tax liability hinges on the identity of the purchaser.
Imposing this tax on non-residents hardly seems like a warm welcome from the governor. Still, unlike Mamdani, it appears Hochul’s zeal for taxing “New Yorkers” has waned.
Related: Mamdani is cycling through a series of unfulfilled promises.
New York State already has one of the least competitive tax systems nationwide, with per capita tax collections ranking among the highest. Albany’s knack for inventing new ways to levy taxes, from “recapturing tax benefits” to targeting remote nonresidents under certain rules, is without parallel.
Recent reports indicate that New York lost $9.9 billion in adjusted gross income (AGI) between 2022 and 2023, which is a loss in taxable income not immediately visible in immigration statistics. Specifically, while Manhattan has gained taxpayers, it lost $922 million in AGI during the same period.
The report notes that in 2023, the top 1% of earners (around 93,000 individuals) accounted for about one-third of the state’s tax revenue that supports 20 million residents. New York has one of the most progressive tax systems in the nation but has inadvertently paved its path toward economic difficulties by pushing wealthy taxpayers away.
Recognizing these budget realities, Hochul has even begun to plead, saying, “Let’s go to Palm Beach and see who we can convince to return” to wealthy New Yorkers. She stands against Mamdani’s proposed “wealth tax” intended for high-income residents and businesses while simultaneously opposing excessive city spending.
In recent years, spending in New York City has surged by over 50%, equating to roughly 12% to 14% after adjusting for inflation, even though the city’s population has slightly declined. This year, New York City’s expenditures are estimated to be about $10 billion higher than the entire budget of Florida.
Ultimately, Governor Hochul seems to misjudge the fundamental issues driving the city’s financial troubles. Merely rhetorical gestures may not suffice to assure current and former wealthy New Yorkers that the state’s leadership recognizes that they have already contributed their fair share.
