Let me preface this: I’m probably opening myself up to ridicule with this, and I’m not asking for sympathy, but the so-called “mansion tax” has possibly entered my life, and it seems inane.
To summarize the tax, which has been adopted by a number of states including NY and CA, there is a 1% tax on the total sale of the home due at closing on any house purchased for over $1,000,000. Now, this may seem like a fair luxury tax to many not familiar with the housing markets in such cities as New York, San Francisco and San Diego, but let me assure you that you are not buying anything approaching a mansion for only a million dollars in these areas.
A hypothetical young couple (we’ll call them Mr. and Mrs. Joe Fiveyearlurker) have saved money for their married life together, refrained from having children for about a decade, rented crappy apartments to save cash but are planning on starting a family in San Francisco, the only city in the US where both of their careers can overlap and they can both make good salaries.
Let’s assume that they want the national average of 2-3 children. They, therefore need at the minimum a 3 bedroom house and about 1300 square feet of space; this would likely be fairly cramped, but serviceable. In San Francisco, in a decent (you won’t get sold crack on the corner, but it isn’t in a highly desireable neighborhood) such a house can easily be over a million dollars. Increase that to a 4 bedroom house and 1600 square feet, and you are almost certainly over one million.
In other words, a million dollar house is not necessarily a luxury, but a necessity.
I’m not against an actual mansion tax, mind you, but one that is designed fairly by taxing actual mansions. Link it to square feet or adjust the level at which the tax kicks in to the average in the vicinity somehow. But a million dollar mansion in Northern New Jersey is not the same as a million dollar tiny home in city limits.
You aren’t going to get anywhere with a sob story here. A $10,000 tax on a million dollar home is not onerous and isn’t going to stop anyone that can afford a million dollar house from buying one. Furthermore, at this point I would have to say owning a home in San Francisco, or any other major city for that matter, is a luxury. Sure having a place to live is a necessity but owning your own home and on top of that a home in the city is not a necessity. This family can’t rent a home or move 20 minutes away where property values are lower.
Didn’t mean for it to be a sob story if it came across that way, and in fact we are quite unlikely to be north of a million dollars on a purchase. But 10K on a million is pretty onerous, actually. It’s not like anyone is pulling up with a suitcase full of cash. At least not since the dot com bust. An extra 10K on the down payment would knock down the monthly payments pretty substantially. But, the numbers are irrelevant. Let’s say that the tax is only one dollar. Does the ability to pay the tax inherently make it fair? I don’t mind paying more in taxes. I’ve been lucky and I’ve been successful and I should pay more in taxes. I’m just wondering if this tax is being appropriately applied.
If we want to tax the luxury of living in a major city, then have an “urban living tax” and if we want to tax owning your own home then add an additional percent to the the homeowner taxes. I wouldn’t oppose that. Hell, I think some of the mortgage tax breaks are insane. What I’m asking is, is it fair to have a tax that is supposed to tax luxury homes, but that is not adjusted for what defines luxury in a given area?
20 minutes from SF or NYC or San Diego is still going to be bordering a million for a suitable home for a small family.
With the median price of homes in the Bay Area (SJ, SF, etc) being something like $750K, certainly a $1Mill house isn’t a mansion- but neither is it a hovel, either. You can buy a nice home in a nice neighborhood here in the bay area for under $1Mill.
However, I have not heard of this tax being passed & signed into law in CA- cite?
Owning a million dollar house is never a necessity.
You can rent, or you can buy someplace cheaper and make the (possibly long) commute, which is what the “poor” schmoes who can’t spend $1,000,000 on a house do.
Hey, I’ve been (and still am!) one of those poor schmoes! We’ve never owned a home.
We can quibble on the issue of necessity, but I don’t think that anyone can argue that you aren’t getting a “mansion” for a million dollars in many areas.
How can a fair tax on overly luxurious homes, which is what this purports to be, not slide with what defines luxury? Middle class families in NYC are buying million dollar homes and that 1% means a lot. Perhaps it doesn’t matter to the uber rich buying genuine mansions.
I know someone who just bought a place in NYC (in the Village) and, while it did come in under $1 mil, only just. It is about 500 s.f. although she reports that she has a terrace. Still, far from a mansion.
But if this tax is too onerous, it will keep people from buying. And if it keeps people from buying, the price of the RE in question will drop. Possibly it already has and that is why my friend spent $999,995 on what is essentially a walk-in closet with terrace, instead of a million-plus on same.
(But my guess is that it is not too onerous and it will not keep people from buying.)
I can’t afford to live in San Francisco, so I live in Oakland. I can’t afford to buy a house in Oakland, so I rent an apartment. I can’t afford to have kids, so I take birth control.
Someone who can afford a one million dollar house is not a member of the middle class. We are talking about ten thousand dollar a month house payments here. The average household income here in Oakland is $47,898. I’m not shedding any tears over people who qualify for $10,000 a month mortgages.
Middle class people in these areas do not own homes. Owning a house of any sort here is a luxury. Having more than a couple rooms in your house here is a luxury. Having more than one kid is a luxury. That’s just how things are in the city. It’s one of the compromises you make when you decide to take ‘well paid job X’ in the city over 'less well paid job Y" somewhere else. If your dream life involves ranch homes, backyards, and multiple children, you need to rethink things before moving to the city.
All taxes of this type are illogical at best, petty and vindictive at worst. People that buy and sell these types of houses are already paying more into the housing tax structure than people with lesser or no homes. Property taxes and plenty of other taxes already extracted the money from them. There is no need to “penalize” a seller just because the money is perceived to there and ripe for the raping. That is a slippery slope that ends with everything earned needing to be justify lest it be “reclaimed in the public interest”. Likewise, there is no logical reason why someone who sells a house for $999,999 should end up with more money than someone who sells a house for 1 million even. The law really penalizes people that simply want to sell their home and buy an equivalent one in the same area. I don’t think it is right to expect people to pay an extra $10,000 fine because they want to move down the street. Having a valuable house in an expensive area doesn’t mean yoiu are flush with cash. Taxes of that type are always a poor economic idea as well.
It is a poorly thought out petty little fuzzy-headed law that simply depends on the fact that relatively few voters fall into this category so it will probably slip by. The ACLU defends Nazi and KKK members to make a point that free speech should be protected no matter what. People that have million dollar houses are no where near that yet it seems that we need an equivalent movement to protect economic incursions like this one.
People want government - some of them may say they don’t but even they keep asking for more of it. And if we’re going to have government we should be responsible enough to pay for it. Taxes are not some punishment we impose on people - they’re just the price we pay for something we bought.
As for the idea of a “mansion tax” in particular, I don’t have any problem with it. I’m sure there are people buying million dollar homes that don’t feel wealthy, but if they aren’t paying that $10,000 tax then somebody else who couldn’t afford a million dollar house is paying it.
They already pay for something they bought. It is called property taxes and people with expensive houses pay more than others. These types of taxes are wrong because they are illogical and vindictive. A more fair tax would simply take 1% out of every home sale. That wouldn’t pass though because too many voters would be affected. Instead, they just single out a portion of the population that doesn’t have enough numbers to defend themselves politically and just rape and pillage. If people with $500,000 homes don’t want to pay $5000 then I don’t know why people with 1 million dollar homes should have to pay twice that in isolation. High house value doesn’t always equal much liquid cash. It is their house we are talking about after all. This is where they live and maybe even where they grew up. It isn’t a tax on imported seal fur coats.
Let me ask supporters this. What is the clear logic behind this tax and what is the money going to be used for? Any legitimate tax should be able to answer these questions like a soldier at attention. I doubt this one has such logic.
According to yahoo mortgage calculator, an $800k mortgage at 6% 30 year loan has a monthly payment of about $4800. I’ve assumed a $200k down payment. Of course, that doesn’t include taxes and insurance, which might bump things up another $1000/month.
Taxes aren’t vindictive. That’s like saying that that the supermarket is punishing my preference for seafood because they charge me more for lobster than ground beef.
I will admit one aspect of this tax, as described, seemed unusual to me. According to the OP, there’s no tax on home sales below $1,000,000 and a 1% tax on the total price for sales above $1,000,000. This would create the unlikely scenario where a house sold for $999,995 pays zero dollars in the tax but if the house was priced only ten dollars higher, the buyer would owe a $10,000 tax (plus a nickel). This would obviously place a huge wall on house prices at $1,000,000 - crossing the million dollar mark would be like breaking the sound barrier. The usual way taxes like this are calculated is the amount above a minimum ceiling is taxed - buy a house for $1,000,000 or less and pay nothing; buy a house for $1,001,000 and pay tax on $1,000 (ten dollars); a $1,500,000 sale is taxed on $500,000; a $4,000,000 sale is taxed on $3,000,000; and so on.
Okay. 5k a month mortgage (see the thread on discalculia for more details). Thats still 60k a year on the mortgage alone- well over the $47,898 that your average Oakland household makes. And I know they won’t give you a mortgage for more than half your monthly income and they don’t like to do it for more than a third.
60k*3= $180k. Nearly four times the average income of the people around you. I’m sorry, but that isn’t the Middle Class. We have people in the NY transit strike thread bitching about how transit workers make 50k. Don’t tell me any family pulling in 180k a year isn’t doing pretty darn well and the things they can afford arn’t luxurys.
Now, if we should tax luxuries is a different story.
I make 6 figures with a lot of mouths to feed. No sympathy on a 1% tax. In fact, I’ve got no sympathy for those who oppose a true progressive tax (not one on paper but turns regressive when all deductions and shelters are taken into account).