The kerfuffle masks the larger problem with New York City’s broken property tax system, which undervalues high-end condos and overtaxes renters. Little of the city’s most expensive real estate is actually taxed at its market value. This creates a powerful incentive for the world’s richest people to park their money in New York City real estate and contributes to the housing crisis pricing out everyday residents.
The New York City comptroller said a pied-à-terre tax could generate approximately $500 million annually from an estimated 11,200 second homes with market values above $5 million.
“There is sometimes a theatrical component of this, where the wealthy are treated as engines of economic prosperity,” said Vanessa Williamson, a senior fellow at Brookings and author of “The Price of Democracy” on America’s taxation history. “The presumption with leaving is they will take economic growth with them.”
New York City’s wealthy are critical to its tax base, but it’s families with young children that are the economic engines of cities, she said. They are many cities’ highest earners, biggest spenders and future workers – as well as the people leaving high-cost metros in droves.
In New York City, households with young children are twice as likely to leave as those without young children, according to the non-profit Fiscal Policy Institute.
“New York’s pattern of out-migration is primarily a result of an affordability crisis in the state, particularly for families,” the organization said in a 2024 report.
New York City has also been losing wealthy residents, but few people move solely because of taxes.