Zohran Mamdani Gets Positively Giddy About Taxing The Rich

Here in New York, our new Socialist Mayor Zohran Mamdani ran on a platform of “taxing the rich.” But that leaves a question to which the answer up to now has not been completely clear: Does Mamdani advocate taxing the rich because he thinks it is good tax policy, or does he advocate taxing the rich as a way to take revenge and punish a group he thinks of as predators and oppressors?

Currently the New York Legislature and Governor are in the midst of their annual budget negotiations, in which one of the issues is whether Mamdani will be granted any of his “tax the rich” wishes. Word so far had been that the Governor has resisted those wishes, particularly the wish to increase the rates of income tax on high earners.

However, on tax day (April 15) news emerged that there is some kind of an agreement on one piece of Mamdani’s tax agenda, namely a proposal to impose a special tax or fee of some kind on expensive New York properties used by non-residents as second homes or “pieds-à-terre.” So far the details of the proposal have not been disclosed, beyond a stated goal of raising $500 million per year of revenue from an estimated 13,000 properties valued at $5 million and up. The Mayor and the Governor both released statements disclosing the agreement, and giving their own spin on same.

Over at his YouTube site, Mamdani posted the following video:

Opening lines:

“When I ran for Mayor, I said I was going to tax the rich. Well today, we’re taxing the rich.”

To the extent it was not completely clear before, we now have the answer to our question: This is not about well-considered tax policy, but rather is about punishing the hated and disfavored class of “the rich.” Mamdani’s demeanor in the video is reminiscent of the thrill felt by a hungry hyena finally sinking its teeth into the prey.

Mamdani films his video on 57th Street, in front of one of the string of new luxury condo towers sometimes known as “billionaires’ row.” Excerpt:

“[The new tax is for properties] like this penthouse, which hedge fund CEO Ken Griffin bought for $238 million. The pied-à-terre tax is specifically designed for the richest of the rich. Those who store their wealth in New York City real estate but don’t actually live here. But even so, they’re able to reap the huge financial rewards of owning property in . . . the greatest city in the world. . . . This is a fundamentally unfair system that hurts working New Yorkers.”

Take that, Ken Griffin!

Meanwhile, even as the tax will impose an average incremental cost of about $40,000 on each of the 13,000 most hated people in the City, the additional revenue will be less than 0.5% on an annual budget well in excess of $100 billion.

If you find that you are scratching your head about how the current system is “fundamentally unfair” and “hurts working New Yorkers,” well, so am I. All the properties in question already pay full real estate taxes, which increase proportionally with value of the property. Exceptions to proportional property taxes for the elderly already don’t apply to high value properties and high income people. In return for their full real estate tax payments, the wealthy pied-à-terre owners consume almost no City services, because they don’t live here most of the time. Certainly, almost none of them consume the things that are the big items in the City budget, which are K-12 education and Medicaid. Yes, they get some police and fire protection, but those services are heavily concentrated in the low-income and high-crime areas uptown and in the outer boroughs. Some of the billionaires are also undoubtedly big supporters of our cultural institutions, like the museums and the opera. (Ken Griffin definitely falls in this category.). Their spending when they come to town drives the retail uses in Midtown, and many associated jobs. Maintenance of their properties provides yet more jobs. If there is some way in which having these people around sometimes hurts other New Yorkers, I can’t think of it. What am I missing?

And then, this may be the most easily-evaded tax ever created. Likely, it will just immediately wipe out the business represented by “billionaires’ row,” consisting of condo buildings intended for sale to pied-á-terre owners. Instead, we can have the same apartments turned into short-term rentals for the same billionaires, but owned by people who are New York residents. Problem solved! Will Griffin himself be able to beat the tax by just doing a sale/leaseback of his existing apartment? That depends on the exact language of the law. But whatever exact language they use, I have no doubt that there will be easy structures to get around it. And the revenue will start well below the projected $500 million, and then decline rapidly from there as people implement the workarounds.

The income tax is not so easily avoided, because that requires moving away. If you have spent a lifetime putting down roots and building a family, that is not so easy to do. But with this pied-à-terre tax, we’re talking about people who by definition have fewer roots, and who have options of renting rather than buying, or of having their second (or third) home somewhere else.

If you think that this is such a bad and counter-productive idea that nobody could possibly support it, take a look at some of the comments on the video over at YouTube. Things like “I DONT EVEN LIVE THERE AND IM PUMPED”; or “THAT’S MY MAYOR”; or “Can you imagine if even 10% of politicians were like Zohran??? It could be a utopia.” Are these (and many others like them) sarcasm? That’s possible in some cases, but overall I don’t think so. There’s a tremendous amount of anger and jealousy out there, and a thirst for punishment.

In other news, research from the Bank of Canada reports that some 40% of Canadians who would rank in the top 1% by income are now living in the United States. The Canadians are calling this the “brain drain.” Yahoo Finance says that the trend is driven by “lower taxes” in the U.S. Who could have guessed?