New York expected to impose pied-à-terre tax but no income tax hike on the rich

New York City is poised to implement a new tax on luxury second homes under a tentative budget agreement announced by Governor Kathy Hochul on Thursday. The measure targets affluent non-residents who maintain multimillion-dollar properties in the city while primarily residing elsewhere.

The proposed “pied-à-terre” tax represents a partial victory for Mayor Zohran Mamdani, who campaigned on promises to “tax the rich.” However, the agreement falls short of Mamdani’s broader goal of implementing a comprehensive tax increase on New York’s wealthiest residents.

According to Hochul, the tax would apply to properties valued over $5 million and could generate approximately $500 million annually for New York City. The proposal specifically targets second homes within city limits, excluding other affluent areas in the state such as the Hamptons on Long Island.

“We were able to accomplish this extraordinary budget, with all these accomplishments, without raising statewide taxes at all,” Hochul told reporters, underscoring her opposition to broader tax increases that she fears could drive wealthy residents and businesses to lower-tax states.

The initiative comes at a critical time as Democrats attempt to address voter concerns about affordability ahead of the midterm elections while maintaining support from the business community. New York City faces a substantial budget deficit that has put pressure on officials to find new revenue sources.

Critics of the proposal include prominent business leaders, Republicans, and some moderate Democrats who warn that additional taxes could accelerate wealthy individuals’ exodus from the city. This concern has gained traction as remote work options have made geographic flexibility more feasible for high-income earners.

State legislative leaders have cautioned that many details remain unsettled. “There is no budget deal,” said Carl Heastie, Democratic speaker of the state Assembly, noting that significant financial aspects of the budget are still under negotiation.

Meanwhile, progressive groups like the New York City chapter of the Democratic Socialists of America, of which Mamdani is a member, have criticized the proposal as insufficient. The organization’s co-chair, Gustavo Gordillo, stated that the pied-à-terre tax “only fills 10% of NYC’s deficit” and called for more aggressive taxation of wealthy residents.

The political tension surrounding the tax was highlighted when Mamdani posted a video on social media last month in which he stood outside a luxury building where billionaire hedge fund CEO Ken Griffin had purchased a penthouse for approximately $239 million. “When I ran for mayor, I said I was going to tax the rich,” Mamdani said in the widely viewed clip. “Well today, we’re taxing the rich.”

Griffin, whose Citadel investment firm manages over $50 billion in assets, expressed alarm at being personally targeted. He called the video “frightening” and potentially threatening to his safety, referencing the recent shooting death of UnitedHealthcare CEO Brian Thompson in the same neighborhood.

The billionaire suggested the incident had influenced his business decisions, stating, “What the mayor of New York has made clear to my partners, and principally my New York partners, is we need to double down on our bet in Miami. Because we want to be in a state that embraces business.”

The debate over the pied-à-terre tax highlights the delicate balance facing New York policymakers as they attempt to address budget shortfalls while maintaining the city’s status as a global business hub. The outcome of this proposal could have significant implications for New York City’s real estate market, municipal finances, and its competitive position relative to other financial centers both domestically and internationally.