A couple of weeks ago, I blogged about growing opposition to higher taxes on expensive real estate in Los Angeles and Chicago. So naturally, a recent Institute on Taxation and Economic Policy (ITEP) piece on these so-called mansion taxes caught my eye.
Local mansion taxes have been around since 1982, notes ITEP local policy analyst Andrew Boardman in his article for the Washington, D.C.-based nonprofit. However, the momentum for them has built in recent years.
Nearly all of today's mansion taxes were enacted or expanded between 2018 and 2023.
ITEP says that as of early 2024, 17 cities and counties have progressive taxes on high-price real estate sales, with several others (see Chicago in my earlier post) considering adopting these policies.
Where, and how much, mansion tax is collected: ITEP, a progressive-leaning nonprofit that, per its mission statement, seeks to shape equitable and sustainable tax systems at all governmental levels, says mansion tax money allows communities to make progress on critical priorities such as housing, education, and infrastructure.
And it's a substantial amount of money. In the 17 places where it's collected, mansion taxes raise nearly $3 billion in annual revenue.
The ITEP graphic below details the existing mansion taxes across the United States.
Mansion tax similarities and differences: Current property transfer taxes share many features, but as the ITEP research points out, they differ in key details due to the differences in the local real estate markets.
Some of the key variations include —
- Five of 17 localities levy top real estate transfer tax rates of 4 percent or more. In eight places the top rate is between 2 and 4 percent, and in four places it is 2 percent or less.
- Five localities apply their top tax rates to transactions worth $1 million and up, 10 have top tax rates that begin between $1 million and $10 million, and two reserve their highest tax rates for properties worth at least $25 million.
- Two localities, Santa Fe and Culver City, employ marginal tax brackets, applying their top tax rates only to the portion of a transaction's value that exceeds a certain level. The remaining jurisdictions apply their tax rates to the full value of each transaction.
- Most progressive local transfer taxes in place today apply to both residential and nonresidential property transactions. Exceptions include Santa Fe, which applies its tax only to single-family home sales, and New York City, which levies higher tax rates on single-family residential transactions.
- Some jurisdictions apply lower tax rates or offer exemptions to certain transaction types, such as income-restricted affordable housing, properties newly converted to residential use, and first-time home purchases.
Where mansion tax money goes: ITEP says that in close to half of the localities with progressive transfer taxes, the revenue provides a dedicated funding source for affordable housing and homelessness alleviation.
"In places such as Baltimore, Los Angeles, and Santa Fe, no dedicated funding for housing existed before the introduction of a progressive real estate transfer tax," writes Boardman.
Other areas use the added real estate tax money for public school facility improvements (Montgomery County and Santa Monica), transit system projects (New York City), and as a general revenue source for infrastructure, health, and parks expenditures.
Boardman and ITEP argue that taxes on high-end homes enable communities to make greater investments in their area's common good by increasing contributions made by those at the top of the economic ladder.
That's obviously a political and fiscal argument that will continue as states and cities look to balance and/or bolster their budgets.
For now, though, the ITEP data provide a wealth of numbers. I encourage you to check out the full report, Local Mansion Taxes: Building Stronger Communities with Progressive Taxes on High-Value Real Estate, at the ITEP website.
From all the article's facts and figures, I'm selecting 17, the number of current locales with mansion taxes, as this week's By the Numbers honoree.
You also might find these items of interest:
- New Jersey is number one in property taxes
- KY homeowners get 8 years of free services due to tax office recording error
- Voters approve cannabis tax ballot measure, split on property tax relief initiatives
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