Fascinating: So How Is Zohran Mamdani's New Pied-à-Terre Tax Supposed To Work?

Here in New York, we continue to wait for the announcement of the annual budget that was due on April 1.  Negotiations among the Governor and legislative leaders continue, with one big open issue being the potential extension of the “net zero” deadlines of the Climate Act.  

While many issues may remain open, one thing on which there appears to be agreement is what they are calling the “pied-à-terre” tax — a real estate tax surcharge on New York City apartments valued at $5 million and up that are owned by people who are not permanent residents of New York.  We know that that tax is an agreed part of the budget package because Mayor Mamdani bragged about it in his cringey video of April 15, which I covered (and linked) in my April 17 post.  Both Mamdani and Governor Hochul have asserted that the new tax will raise approximately $500 million per year in new revenue for the City.  However, neither Mamdani’s video nor anything else has disclosed the details of how this new tax will be implemented.

At first glance, implementation might seem easy.  For instance, in his video, Mamdani specifically singled out a famous four-floor penthouse apartment at 220 Central Park South, purchased by hedge fund billionaire Ken Griffin in 2019 for $268 million.  Here is a picture of that building:  

The $268 million price of Griffin’s apartment is $263 million in excess of $5 million, right there.  Impose a 1% surcharge on the value in excess of $5 million, and you will get new revenue of $2.38 million per year.  Or will you?

The New York Post has several articles in today’s edition discussing the pied-à-terre tax and its impact on Griffin specifically.  The most interesting among them is the one that appears on the Business page, written by Taylor Herzlich, headline “COURTING CHAOS: ‘Pied’ Piper Zo’s tax will fuel legal woes: pros.”  This article discusses some of the arcana of how the New York City real estate tax actually works.  Excerpt:

[A]s experts noted, there is a huge dif­fer­ence between NYC’s prop­erty assessment val­ues and mar­ket val­ues, and the pols have yet to cla­rify which fig­ure will be used for the new levies. . . .  Nathan Gold­man, a mem­ber of the Amer­ican Account­ing Asso­ci­ation and a pro­fessor at North Car­o­lina State Uni­versity, told The Post [that] [t]here are going to be a whole lot extra lay­ers of legal battles that ensue as a res­ult of this because this isn’t like the stock mar­ket. . . .  This is a sub­ject­ive num­ber.”