Comment by zaroth | Hacker News Reader

Comment by zaroth | Hacker News Reader

I assume the ability to sell these floors out as a tax shelter / investment property factors in heavily to the financing and scale of the entire project to begin with. Does NYC get to have a One57 Tower without duplex condos selling for 9 figures? Probably not. Do duplex condos sell for anywhere close to 9 figures if the annual property taxes are 7 figures? Certainly not.

When Mayer Bloomberg talked of the ultra-rich moving in, he didn't mean so that the city could literally confiscate their assets, but rather, the city can benefit from the investment that follows. There are great arguments to be had about how much NYC actually benefits from massive infrastructure projects like One57, but the property tax structure is intentional because the city benefits in other ways.

A more interesting analysis would consider the myriad costs and benefits of the construction and upkeep of One57. Obviously there is very significant tax revenue and expenses to the city generated through various channels for a building at that scale. They are not and should not be taxed like single family homes or condos.

The problem with this reasoning is that while new buildings / tenants may be marginally beneficial to the city, if the rate new condos pay is significantly lower than existing buildings, then fairness issues arise. To me, this is analogous to incentives for building factories, etc - why does the big / new factory get a tax incentive while the small / old one doesn't, if it generates the same spinoff investment / employment / revenue? Put another way, the marginal revenue gain may be positive, but lower than the community average revenue gain (or gain in comparable properties) - how is that fair?

(author here) To your point: "They are not and should not be taxed like single family homes or condos."

They are taxed like condos—they are condos. I think the larger issue in this story is that the tools for assessing tax value are crude and don't allow the city to assert a progressive taxation. The range between 0.017 and 1.7 is large, and the city needs to be able to find a target taxation that draws in revenue without warding off services. There's no reason to believe the limit there is 0.017 percent.

I understand they are taxed under the code as a "condo" but isn't the point of the article that they are not taxed at the rate of a normal condo vis-a-vis their sales price?

Since the sales price is 6 sigma to the right on the bell curve, it doesn't surprise me at all that the tax rate as a percentage of sales price would be similarly offset to the left. I think it would have made the analysis better to have also ranked the dollar value of tax revenue per dwelling unit, and you would see they are paying an extremely high share under that metric. But then the title of the article would have to be "Why Billionaires Pay the Most Per Capita Property Taxes in New York".

Another way to look at it, is if the tax rate were 1.7% instead of 0.017% then the building could not have been built. If the rate were 0.17% the sales price would have been closer to $10 million than $100 million. I think there is no scenario where the city gets the tower, the condo sells for $100 million, AND the city takes even .17% each year in property taxes.

The article reads like the city paid to build the tower and is giving the units away rent-free. It just seems like such a distorted view of the full macroeconomic impact, when in fact NYC is getting exactly what Bloomberg meant when he said he hoped the billionaires to move in.

<i>isn't the point of the article that they are not taxed at the rate of a normal condo vis-a-vis their sales price?</i>

That isn't the point I'm making. Ultra-luxe condos are taxed the same way as normal condos are. It's the same mechanism. But the formula is crude and can't anticipate that there might be condo buildings with no comparison in the rental market.

<i>I think it would have made the analysis better to have also ranked the dollar value of tax revenue per dwelling unit</i>

The charts I included do show the dollar value of tax revenue per 10 units that sold for extraordinary prices. Perhaps these dollar values (e.g., $17,000 per year) do seem very high, but that is a matter of perspective. If you are the owner of a $5 million condo, and you pay $17,000 annually in property taxes, it will seem outrageous that the owner of a $100 million condo pays the same. This is why it's important to compare effective property tax rates. Just comparing numbers or digits is meaningless in a discussion about in/equity.

<i>I don't think there is a scenario where the city gets the tower, the condo sells for $100 million, AND the city gets 1.7% each year in property taxes.</i>

Perhaps not. I still think the burden is on the city and state to demonstrate why the inequity is warranted.

HTML doesn't work in this forum, apparently. In any event thanks for reading.

but rather, the city can benefit from the investment that follows

Offering tax abatements to attract "investment" in a community is like offering ballooning ARMs to attract long-term home ownership: the incentives are set up to cause exactly the opposite of the stated goal.

"he didn't mean so that the city could literally confiscate their assets"

well, I wouldn't put it past him.

You're acting like the uber rich wouldn't be in New York anyways.

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