Introduction to the ‘Taylor Swift Tax’
State and local governments are adopting their own versions of the “Taylor Swift Tax” to gin up revenue, but not everyone likes the gold rush.
Rhode Island swung big this year when it instituted a severe tax hike on high-end real estate. The measure — cheekily nicknamed for the state’s pop star resident — hit second homes valued at more than $1 million. State and local governments across the country have set their sights on the homes of the wealthy, CNBC reported, earning backlash from real estate insiders and wealthy buyers.
The Impact of the ‘Taylor Swift Tax’
Brokers argue that these surcharges hurt local economies. Dwindling municipal coffers and mounting public anger over housing costs are emboldening public officials to move ahead.
Swift’s infrequently occupied Rhode Island mansion was tied to the state’s new tax. Richard Beetham / SplashNews.com
The pop star’s property taxes could increase by nearly 68%, according to CNBC. AFP via Getty Images
Rhode Island’s “Taylor Swift Tax,” passed in June, is on the extreme end of these policies. Homes of non-primary residents will be charged $2.50 for every $500 of assessed value above $1 million.
The Non-Owner Property Tax Act
The Non-Owner Property Tax Act was tied to Swift’s ownership of High Watch, a seaside mansion Swift picked up in 2013 for $17 million.
The picturesque home, the history of which inspired Swift’s critically acclaimed song “The Last Great American Dynasty,” is perched on 5 manicured acres along the Atlantic coast. It’s currently undergoing $1.7 million in renovations, the Post previously reported, with speculation that Swift is making room for her now-fiancé Travis Kelce.
High Watch was recently assessed at $28 million.
Despite local accounts that she rarely visits at the eight-bedroom mansion, Swift’s property taxes will soon spike by nearly 68%, CNBC estimated, with an annual bill up to $337,442.
Backlash from Brokers
Brokers told CNBC that such policies ostracize the area’s biggest spenders and hinder property deals.
Rhode Island’s recent measure is part of a wave of property surtaxes across the country. Los Angeles Times via Getty Images
Local Sotheby’s broker Donna Krueger-Simmons called the taxes “a smack in the face.”
“These are people who just come here for the summer, spend their money and pay their fair share of taxes,” Krueger-Simmons told CNBC. “They’re getting penalized just because they also live somewhere else.”
The Wave of Property Surtaxes
The “Taylor Swift Tax” is part of a wave of similar property surtaxes across the country, from the sprawling hillside mansions of Los Angeles to the seaside retreats along Cape Cod.
An influx of wealth during the pandemic led even Montana — a state with historically low taxes and limited public funds — to adopt a similar measure in May. The state’s two-tiered property tax plan ups taxes on second-homes and short-term rentals while providing relief to full-time residents.
Montana-based brokers claim the state’s new two-tiered property tax hurts small businesses and slows down the market. Getty Images
Los Angeles’ “mansion tax” shook up the real estate world in 2022, but its returns have been disappointing. Getty Images
Effects on Local Economies
Montana-based Christie’s agent Valerie Johnson told CNBC that the plan harms locals with short-term rental businesses as well as the wider real estate market.
“I’ve heard about some buyers who have put on the brakes to wait for the dust to settle and see what happens,” Johnson told the outlet.
Los Angeles’ so-called “mansion tax,” which passed in 2022 to tax real estate deals over $5 million, has generated a mere sliver of what proponents projected, CNBC reported. Proponents promised $600 million to $1.1 billion a year. After several years, only $785 million has been raised. Rhode Island is instituting a similar conveyance tax this October, CNBC reported.
Conclusion
Despite uncertainty, Cape Cod is opting in to the trend. The coastal locale is considering a proposed transfer tax on homes over $2 million, in hopes that resulting revenue will help address the peninsula’s housing shortage. The ‘Taylor Swift Tax’ is a controversial measure that has sparked debate among real estate insiders and wealthy buyers. While it aims to generate revenue for state and local governments, its effects on local economies and the real estate market are still unclear.
FAQs
Q: What is the ‘Taylor Swift Tax’?
A: The ‘Taylor Swift Tax’ is a tax hike on high-end real estate, specifically targeting second homes valued at over $1 million.
Q: How does the tax work?
A: The tax charges $2.50 for every $500 of assessed value above $1 million for non-primary residents.
Q: What is the impact of the tax on local economies?
A: Brokers argue that the tax hurts local economies by ostracizing big spenders and hindering property deals.
Q: Are other states adopting similar measures?
A: Yes, states like Montana and California are adopting similar property surtaxes to generate revenue.
Q: What is the goal of the tax?
A: The goal of the tax is to generate revenue for state and local governments to address housing shortages and other public needs.
