“ Taylor Swift Tax ‘on high -end holiday homes spread to more states

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A new push of the States to tax the real estate of the rich has sparked a backlash among brokers and potential buyers, who say that taxes punish the most important local expenditure.

Tax increases on the second expensive houses of Rhode Island and Montana to the transfer tax offered by CAPE COD on houses of more than $ 2 million and the mansion tax, governments of states and locals see a gold mine in the expensive properties of the rich.

“It is a slap in the face of people who spend money here,” said Donna Krueger-Simmons, sales agent at Mott & Chace Sotheby’s International in Watch Hill, Rhode Island.

Tax increases are motivated by stricter state budgets and populist anger in the face of housing costs. States seek to compensate for the expected budgetary reductions in the new tax and expenditure invoice in Washington. At the same time, the housing market has become a story of two buyers, the middle class and younger families who find it difficult to allow themselves houses while the luxury housing market prosperous with rich buyers of all cash.

The solution for many states: tax the houses of the rich.

The new Rhode Island sample, nicknamed “The Taylor Swift Tax”, is among the most extreme. The Popstar bought a beach house in the Elite Watch Hill community in 2013.

The measurement requires a new supplement to secondary residences worth more than a million dollars. For non-primary residences, or those not occupied for more than 182 days per year, the condition will charge $ 2.50 for each $ 500 in value evaluated above the first million dollars. This burden is in addition to existing land taxes and will increase large increases for luxury houses in Newport, Watch Hill and other well -arranged summer communities.

Swift’s house, for example, is estimated at around $ 28 million, according to local real estate files. Its current property taxes are estimated at around $ 201,000 per year. The new costs will add an additional $ 136,442 to its annual taxes, bringing its annual total to $ 337,442 – even if the inhabitants say that it rarely visits.

Real estate brokers say that the increase targets taxpayers who already contribute the most. The rich owners of the latter pay heavy land taxes but do not use many local services, because their main residences are in New York; Boston; Palm Beach, Florida; or other places. Their children generally do not attend local schools, and they are infrequent users of the police, fires, water and other municipal services, as most of them remain for only 10 to 12 weeks of the year.

“These are people who come here for the summer, spend their money and pay their fair share of taxes,” said Krueger-Simmons. “They are penalized just because they also live elsewhere.”

Longtime brokers and residents say that Newport, Watch Hill and other seasonal sea cities are economic engines for businesses, restaurants and local hotels.

“You just hurt people who support small businesses,” Lori Joyal told the Lila Delman compass office in Watch Hill. “You continue people who spend most of money in these cities.”

The Rhode Island also hikes on its tax on transport on luxury real estate from October. The tax on real estate sales will cost an additional $ 3.75 for each $ 500 paid above $ 800,000 for a real estate purchase. At the same time, the strong tax on the successions of the state dissuades many of the ultra-rich to live there full time.

The brokers say that some owners of second homes plan to sell and that many potential buyers interrupt their purchases. Although the increase in taxes is not supposed to lead to a significant wealth flight, Joyal said that potential buyers of Rhode Island are already considering coastal cities in Connecticut as alternatives.

“These are always choice,” she said. “In the end, it is a question of how they can choose to spend their discretionary dollars. Connecticut has beautiful coastal cities without some of these other high taxes.”

Montana adopted a similar tax. The influx of Californians and other wealthy new arrivals who have been in the state during the cochered led to an outbreak of house prices and a growing resentment to gentrification. Meanwhile, the low tax rate of the state and the absence of a sales tax left it for little room for income increases in order to manage the necessary increase in services.

In May, the State adopted a two -level land tax plan, reducing rates for full -time residents and increasing tax residences and short -term rentals. For main residences and long -term rentals evaluated or lower than the median price of state houses, the tax rate will be 0.76%. Houses of more value that this will face a rate system at several levels up to 1.9% over four times in four times the median price.

The Montana Ministry of Revenue expects the changes, which will start next year, will increase an average of 68% on average. Brokers say that some buyers are waiting to see the tax invoices next year before making decisions on the advisability of buying or selling.

“I have heard of some buyers who put the brakes to wait for the dust to settle down and see what is going on,” said Valerie Johnson, with the international real estate of Purewest Christie in Bozeman, Montana.

Johnson said that even if the tax was presented by legislators as striking the rich owners of secondary, he will also hit the long -standing residents who have investment houses and will rent them for income.

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

Manish Bhatt, an analyst of the main policies at Tax Foundation, said that the tax increases intended for the rich owners of the second house can be popular politically, but they rarely constitute a successful or effective tax policy. The reform of the property tax should be wide, rather than focused on taxpayers who are distinguished simply because they do not live in a full-time community, he said.

“There is a catch to find income right now,” he said. “But taxing the owners of the second house could have the opposite impact – dissuading people from having a second house or continuing to own in these communities.”

Although the new taxes cannot hunt the rich, “we know that taxes are important for businesses and individuals and could lead people to make the decision to buy in another neighboring state,” said Bhatt.

The planned income for new taxes can also disappoint. When Los Angeles succeeded in his so-called “mansion” in 2022, supporters praised projections of income between $ 600 million and $ 1.1 billion per year. The tax, imposed on real estate sales of more than $ 5 million, only raised $ 785 million after more than two years, according to the Los Angeles Housing Department.

Higher interest rates that harm the housing market have played a role, according to experts. However, Michael Manville, professor of urban planning at the UCLA Luskin public affairs school, said the rich buyers and sellers have also reduced transactions in response to the tax.

“The drop in income is a reason to be concerned because it suggests that the tax could in fact reduce transactions, which can in turn reduce the revenue of housing production and property tax,” he said.