New York City’s residential real estate industry was quick to react to President Trump’s tax reform proposal, with many organizations releasing statements sharply condemning proposed changes.
In particular, the proposed elimination of the federal tax deduction for state and local property taxes has been criticized by many as an action that would tax more money from the City and its residents.
The industry’s biggest lobby, the Real Estate Board of New York, soundly rejected the proposal, calling it “double taxation.”
“This deduction has been in place since the commencement of income tax in 1913,” said REBNY president John Banks in a statement. “Its elimination would lead to the diminution of basic municipal services for all New Yorkers. The elimination of the deduction of real property taxes for homeownership as an adjustment to home owners’ taxable income would make New York, and other states and cities across the country, less competitive for real estate investment.”
The New York Building Congress also criticized President Trump’s tax reform proposal, saying it would be “crippling” for the middle class. “The proposal to eliminate the federal deduction for state and local property taxes must be considered a non-starter for every one of New York State’s elected representatives in Congress,” said the New York Building Congress in a statement.
“As has been well-documented for decades, New York already sends billions more in tax dollars to Washington each year than it gets back, and this proposal would only exacerbate this disparity. In addition to being a simple matter of fairness, this provision would be crippling to the middle class, sharply decrease our competitiveness as a city and state, and do considerable harm to the national economy by robbing New York City of the funding it needs to invest in its infrastructure and other vital services.”
Michael Hurwitz, partner and REIP group leader at Marks Paneth, said that what Trump’s administration has released so far on the proposed tax reform bill isn’t detailed enough to give a true understanding of how it could affect the real estate industry.
“Does it affect the way we buy homes? I don’t think so,” he said of the proposal. “Right now, it’s just a whole bunch of crazy ideas.”
The co-founder and managing director of Ideal Properties, Aleksandra Scepanovic, said that any effect the tax reform could have on the industry wouldn’t likely be seen until 2019 or later.
But if it did pass, a few things could affect New York City, namely middle and upper-middle class homeowners.
The proposal calls for eliminating the federal tax deductions, which wouldn’t have much of an effect on the top earners, but could affect middle and upper-middle class New Yorkers, and those who can’t itemize deductions, said Scepanovic.
“On the plus side of the equation, we have mortgage interest reduction remaining in place, that somewhat dampens the blow and mostly benefits high middle-class households,” said Scepanovic.
The possible reduction of the top tier tax rate could also benefit the highest-earning New Yorkers, which could in turn help reinvigorate a slumping ultra-luxury market, she said.
The tax reform proposal is just a proposal at this point, and so far more of an outline than a comprehensive bill, suggesting there’s much more to come.
“I think this is just the beginning of the conversation, and probably going to be thorny one,” she said.