Taylor Swift is everywhere. No, I’m not referring to her frequent appearances at NFL games. I’m talking about Swift, and those like her, who own second homes (hers is in Narragansett, RI) and are being targeted with special taxes to fund the agendas of the local politicians. The Wall Street Journal’s Nicholas G. Miller explains that “Taylor Swift taxes,” like the one about to hit Rhode Island, are proliferating. He writes:
State and local governments across the U.S. are seizing on a juicy new target for plugging budget holes and easing housing shortages: second homeowners.
New York City is planning to tax pieds-à-terre worth $5 million or more. Rhode Island’s “Taylor Swift tax” will hit homes valued at over $1 million that are uninhabited for at least 183 days of the year. Nicknamed after the pop star who owns a waterfront mansion in Westerly, R.I., the measure is set to take effect in July.
Meanwhile, courts are weighing proposals in Montana and San Francisco for extra levies on vacant homes.
Targeting second homes is almost a no-loss proposal for politicians. It’s a “two birds with one stone” hit against two of politicians’ favorite bogeymen, out-of-towners, and the wealthy. Taking money from rich tourists and redistributing it to the people who vote for you seems like a flawless concept, but they have their drawbacks.
Ken Girardin and Jared Walczak explain some of the downsides of the second home taxes in City Journal, writing:
Higher taxes on select high-end properties will make investment in the construction of new high-value housing less attractive. Given city policies that deter investment in other housing, high-end development—which frees up other properties—improves housing affordability and availability, even though the homes and condos being built are not anyone’s definition of “affordable.”
The use of some of these properties as second homes can in fact be a boon to local coffers. They generate substantial property-tax revenue while their nonresident owners put comparably little strain on local budgets. Those residents do not, for instance, have kids enrolled in local schools, and their high incomes mean that they are not using means-tested local services.
Action Line: There are no free lunches. Taxes will hurt somewhere, no matter who the target is. People will move their money where it is best treated, and that means for their second homes, too. Politicians shouldn’t be surprised if their second-home taxes have unintended consequences. Click here to subscribe to my free monthly Survive & Thrive letter.
