The American Interest
Analysis by Walter Russell Mead & Staff
The Hidden Tax Bleeding New York Renters Dry

I_Love_NY

NYC renters are hit every year with a huge tax they probably don’t even know about. Business Insider reports that homeowners pay a much lower property tax than landlords, making for a “property tax system [that] is a perverse cross-subsidy from relatively poor renters to relatively rich homeowners.” New York’s apartment properties are taxed at double the national average, with only one of the 50 largest US cities (Detroit) having a higher apartment tax rate than NYC. DC, for example, taxes apartments at a rate 80 percent lower than New York City.

In some cities, the landlord would absorb the property tax, but not in NYC, where the cost is passed straight to renters:

The reason that landlords would bear most of the cost of a property tax increase is that apartment demand is more elastic than apartment supply: If property taxes go up and my landlord tries to raise my rent, I can move to the next town but he can’t move his building there. But New York City is a geographically large jurisdiction whose residents have a strong preference for living within its boundaries; renters here are much more captive than those in some specific suburb of Boston. [...]

If we just taxed all property at the same rate, apartment building taxes would fall by $1,000 to $1,500 per unit.

All blue cities have hidden taxes and fees that drive up costs and crush economic growth. We needs to do an aggressive study of just how they raise their revenue, and use that data to replace the current convoluted system with one that transparently shows people what they are paying—and what they are getting in return. We suspect that better information would intensify voter pressure for cheaper and more efficient governance—at all levels of government.

Published on June 29, 2013 3:15 pm
  • Andrew Allison

    Bros, we needs to do better copy-editing.

    • Nick M.

      Another intern shall be flogged for this.

  • http://foobarista.blogspot.com foobarista

    Many places have these sorts of taxes; Hawaii also has an explicit “rent tax”, which is supposedly paid by the landlord, but amounts to a sort of sales tax on rent as rents naturally go up by the amount of the tax.

    A surprisingly large number of people, especially on the left, think these taxes “soak the rich”, without realizing that they actually “soak the poor” as they are simply passed through. (Or they soak the public as Section 8 rent money is used to pay these taxes; rent taxes on Section 8 properties are a way for local governments to get at federal housing money.)

    • Corlyss

      ” think these taxes “soak the rich”, without realizing that they actually “soak the poor” ‘
      That’s because we don’t teach economics or history k-12 in this country. We teach ‘em about Heather’s two mommies, and how by joining hands and wishing real hard they can save Mother Gaia from evil profit making activities, and how America is blessed with great bounty that it should give away immediately in the name of social justice.

      • Andrew Allison

        I couldn’t agree more! The fact that most graduates (of high school and college) are economically illiterate is just one more example of the failure of our so-called “education” system.

  • David Bennett

    In some cities the landlord would absorb the property tax…….?!!?!?!?!!!? Huh?

  • bannedforselfcensorship

    I would like the concept of transparent, simple taxes to be adopted. Then you could also more easily score programs…for example if we only had a simple flat tax, then any new program could be priced out for the taxpayer to know truly how much it costs. I call this concept Political Unit Pricing, like unit pricing at the grocery store. It would never be adopted because politicians prefer to hide costs and distribute the goodies and hand out tax breaks.

  • Boritz

    ***use that data to replace the current convoluted system with one that transparently shows people what they are paying***

    Here is where transparency backfires:
    The real-honest-to-science-cost (say the greens) of your electricity is actually six times what you are charged in terms of the impact on carbon emissions and global warming. You should actually be paying much much more for every kilowatthour (and are very likely to do so in the near future) in order to attempt to recover the true cost of generating electricity. This would appear on your bill as an ‘environmental impact’ assessment. It would bite hard, but at last we would have transparency if only from a certain point of view.
    Incidentally, since the poor couldn’t afford to pay this there would be an additional ‘economic assistance’ item on the same bill that would represent transfers from the more fortunate to those in need of assistance.

  • Jim__L

    So what percentage of NYC’s budget is based on this quirk?

    It would seem to me that $1000 a month here, $1500 a month there adds up to real money pretty quick.