罗德岛“泰勒·斯威夫特税”引发房主不满

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You're listening to Bloomberg Business Week with Carol Masser and Tim Stenovec on Bloomberg radio.

Let's talk a little bit about Taylor Swift because everybody is talking about this wedding that is supposedly happening this weekend at Madison Square Garden. But the Bloomberg audience knows that's not the most important thing to be focused on. Especially if you live in Rhode Island.

This is very true because we also have what they're calling the Taylor Swift tax.

Greg Ryan writes all about it. Greg joins us from Boston. He's Bloomberg News Boston money and power reporter. Greg, good to have you on the program. This is a most read story on the Bloomberg terminal and for very good reason. It's not just the headline that is amazing. The entire story is amazing. Taylor Swift tax stirs bad blood with Rhode Island homeowners. What is the so-called Taylor Swift tax?

So the tax is a property annual property tax on second homes in Rhode Island that are valued over $1 million. It's half a percentage point and the was passed last year as part of the state budget. The purpose is to raise money to build more affordable housing in Rhode Island.

It seems like a relatively small amount and I the reason I I bring that up is I just just for the Taylor Swift example, okay? She has a 12,700 square foot mansion. It's assessed at $28 million. So that means an extra tax bill of about $136,000. That's not that much for her given the the value of the home. How is it affecting though people at the lower end of the the income and fame spectrum?

Yeah, it's interesting. I mean the the loudest protest here are not coming from those who own mega mansions next to to Taylor's in in Watch Hill. It's really coming from these homeowners who have had modest properties modest vacation homes in their family for generations, often, you know, three or four generations, who are going to be seeing their tax bills going up by 50% or more with this Taylor Swift tax. You know, a lot of these homes can't be you can't stay in them or you can't rent them out during the winter and parts of the spring or the fall because they're not insulated or they don't have heating.

So, considering, you know, how if people even if people wanted to rent them out to try to make some money to make up for this tax, they really have a a small window to do so in the summer.

I mean, I just find it being interesting that the loudest protests aren't necessarily coming from the billionaires like Taylor Swift, but those who have those vacation homes there. How long has this really been a contentious issue in the area or have we really been seeing this more highlighted as of late?

Yeah, it's interesting. So, the tax was enacted, as I said, as part of the state budget about a year ago, but it's really only gotten on people's radars in the past few weeks. The state sent out notices to those who may be subject to the tax in May, sent about 8,000 notices. And as people have arrived at their summer homes on the coast, you know, conversations have started. It's really only been in the past few weeks that it that there's been an uproar about this.

And actually now there's a law firm in Providence is organizing a lawsuit from you know, they're hearing from these unhappy homeowners who who want to challenge this tax in court saying it's unconstitutional. So, there may be legal action coming in the next few weeks.

Greg, you you make the point in your piece and it's it's a really important one that this is not occurring in a in a vacuum. The challenges that it's trying to address have to do with affordable housing that's affecting pretty much every state in the country right now. But it's also part of a pattern of of leaders in Democratic states of introducing taxes to try to supplement affordable housing or or try to tax those at the most upper ends of the income spectrum.

So, it makes me think of what's happening here in New York with Zohran Mamdani pushing through his second home tax. We just spoke about Ken Griffin and what he's doing in Miami. Uh right now and the the buying of basically that entire building. We just spoke about that a few minutes ago. What what is this What is this signify to you at this moment of time?

There's a lot of voter anger around wealth inequality um around affordability that you know that's a maybe the big buzzword uh this midterm season is affordability. So, yes, you are you you you did see that second home tax also taking effect this week in New York. You're seeing more and more states looking at millionaire taxes. Actually, Rhode Island just last month enacted uh its millionaire's tax. Um Massachusetts, Maine, Washington State, they all have millionaire taxes.

So, um yeah, Democrats, you know, there's their Democratic leaders are saying, "Look, uh we're facing a budget crunch." They're blaming Trump and and federal funding cuts in DC and they're looking toward the wealthy uh to to make up some of that gap.

So, in this particular instance, it's collecting $5 for every $1,000 that a vacation home's value is assessed over $1 million. Do you expect this model to potentially be used

Mhm.

in other regions of the nation?

I think so. I do think that this is a bellwether. That's how these taxes have worked. You saw Massachusetts pass the the nation's first millionaire tax in 2022. More and more states popping up in more and more states the past year or two. So, um and they're you know, think of places that are led by Democrats, California, you know, Washington State, um you know, states up and down the East Coast um that have lots of vacation homes that are vacation hotspots.

So, um I can certainly see this spreading to other states in the coming years.

You mentioned the the potential legal challenge that this this could face. You do note in your piece that the law firm Hinckley Allen and Snyder expects to file a lawsuit on behalf of homeowners challenging this. What what is their argument going to be?

Well, that's that's still under development, but they're they're arguing this this tax violates the the federal and and state constitution. They are they they could claim that it's you know, an unconstitutional taking. What you are here I'm hearing from homeowners and I I'm not sure the extent to which this will be will make it into the legal filings, but again, this argument that you know, it's not fair, you know, we we can't make up this money.

Even if we rent out our homes, we can only rent our homes for a a few you know, handful of months a year. It's just not fair that that you know, we're expected to pay in some cases, you know, upwards of $10,000 or more in in new taxes under under this measure.

So, do you expect any sort of exodus? I mean, I'm also looking at the story about the Providence area, the luxury home sale prices in the area have increased about 6.3% year-over-year. Of course, we know this kind of is due to tight supply and prices going up, but do you expect some of those deep pocketed buyers to start looking elsewhere or are we getting to the point where it's like where else can we go because everyone's pushing them out from certain regions?

Yeah, it's it's fascinating. You know, I I I talked to a lot of real estate agents for this story and you're you're not really seeing any sort of effect yet and and they don't they don't expect that you will for at least at least the near term. I spoke to one agent who pointed to a Texas resident who sails off off the Newport coast and was in the market for a a house, you know, in the $10 million to $20 million range and then once this tax passed decided, yeah, forget about it.

I'll look elsewhere. But that's really been the exception. I you know, people are are really attached to these homes, especially these homeowners whose properties have been in their family for generations. So, you know, the tax just went into effect. They're not feeling the financi

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