With Weed Tax a Bust, Pied-a-Terre Tax Is Smoking

Tax revenue from legalized marijuana will not be in this year’s state budget, so it looks more likely than ever that a pied-a-terre tax on the homes of wealthy absentee owners will provide badly needed revenue to fix New York City’s subways. 

Governor Andrew Cuomo has announced he won’t be able to push a marijuana bill through the state legislature in time for the looming April 1 deadline for the state’s fiscal year budget, Crain’s reports. Such a tax would have brought in an estimated $300 million over three years toward subway repairs. 

With that revenue no longer in the pipeline, Cuomo says it will be replaced by revenues on a proposed pied-a-terre tax on absentee owners of houses and co-op and condo apartments worth more than $5 million. That tax could bring in anywhere from $530 million to $660 million a year, according to various estimates. 

A pied-a-terre tax has languished for years in Republican-controlled Albany, but it gained new momentum when Democrats took over the state legislature earlier this year. Absentee multi-billionaire Ken Griffin’s recent purchase of a $238 million condo apartment on Central Park South added fuel to the pro-tax brushfire. 

Now a group has come out with an estimate that a pied-a-terre tax would more likely generate just $372 million a year. Gregory Heym, chief economist at real estate services giant Terra Holdings, and former city finance commissioner Martha Stark gathered data from city records dating back to 2003. Heym and Stark determined that the city boasts 4,375 single-family homes valued at more than $5 million, 3,929 co-ops, and 8,009 condos valued at more than $5 million. They believe 15 percent, 15 percent and 50 percent are pieds-à-terre, respectively. From that, they arrived at their $372 million revenue estimate. 

"The revenue estimate that is floating around seems significantly higher than what this analysis suggests," says Stark, now the policy director at Tax Equity Now New York, a coalition of landlords and civil rights groups suing to reform the city's tangled system of property taxation.