Tangle - Mamdani's "tax the rich" proposal.

Starting point is 00:00:00 From executive producer Isaac Saul, this is Tangle. Good morning, good afternoon, and good evening, and welcome to the Tangle podcast, the place where you get views from across the political spectrum, some independent thinking, and a little bit of RR. Take. I'm your host for today, Tangle's managing editor, Ari Weitzman, and our topic is the wealth tax in New York City. We're going to get into all those details in a little bit, but before we get there, I just wanted to talk about a space. special offer that we have just for today. It's something that we're calling the 25 for 25 sale. For the next 25 hours, you can get 25% off our yearly subscription bundle. That's ad free newsletters, ad free podcasts, ad free everything we've ever produced, Friday edition, Sunday edition, special interviews, all of that for just 625 a month for the first year. That expires at 1 p.m.

Starting point is 00:01:03 Eastern time tomorrow. So if you're listening to this and you want to take advantage of that deal, head over to reetangle.com right now to get your membership. With that said, I'm going to pass it over to Audrey for today's topic, and I'll be back for my take. Thanks, Ari. Here are today's quick hits. Number one, President Donald Trump said he's extending the ceasefire with Iran, quote, until such time as their leaders and representatives can come up with the unified proposal, end quote, adding that the U.S. blockade of Iranian ports will also continue. Earlier on Tuesday, the president had suggested he opposed extending the ceasefire. Separately, Iranian state media reported that Iran seized two container ships in the Strait of Hormuz on Wednesday, claiming that the ships were operating

Starting point is 00:01:54 without required permits. Number two, Virginia voters approved an amendment to the state constitution, allowing legislators to proceed with redrawing the state's congressional map for the remainder of the decade, which is expected to put 10 of 11 districts and Democrats favor. The referendum passed with 51.5% support, Number three, Kevin Warsh, President Trump's nominee for Federal Reserve Chair, testified before the Senate Banking Committee, telling lawmakers that he viewed the central bank's independence as essential and that the president had not pressured him to push for lower interest rates. Number four, Democratic Representative from Florida, Sheila Cherfellus McCormick, resigned from the House shortly before the Chamber's Ethics Committee gathered to discuss sanctions for multiple campaign finance and reporting violations. Churplas McCormick is also charged with stealing $5 million in COVID-19 disaster relief funds. She is the third House member to resign since April 13th. Number five, the Justice Department indicted civil rights organization

Starting point is 00:02:56 of the Southern Poverty Law Center, or SPLC, on 11 counts, including defrauding donors. The organization allegedly paid members of neo-Nazi groups millions of dollars to act as informants for a now-defunct program to monitor threats from extremist groups, An effort the Justice Department said was concealed from donors. The SBLC denied any wrongdoing and said it was being targeted for political reasons. President Trump's posh, multi-million dollar penthouse triplex and Trump Tower is a second home for a man who lists his Moralago estate as his legal residence, making him a prime target to pay the new Pietater tax Mayor Mondani wants to help close his budget.

Starting point is 00:03:43 So it's not a surprise when shortly after the tax was unveiled, the president let loose, slamming the man he's been so chummy with. I've made it clear to the president and to the public that I am deeply supportive of taxing the rich and taxing non-resident secondary homes worth more than $5 million falls right within that. On Wednesday, April 15th, New York City's Democratic mayor, Zoran Mamdani,

Starting point is 00:04:07 and New York State's Democratic governor, Kathy Hochel, proposed a PA-to-Tare tax, an annual surcharge on New York City secondary residences valued above $5 million, owned by those who live primarily outside the city. Momdani and Hockel claim the measure would raise $500 million in annual revenue to address the city's budget shortfall. If enacted, it would be the first Pieda to tear tax in New York's history.

Starting point is 00:04:32 For some additional context, Mamdani was elected mayor in 2025 on a platform featuring several proposals to increase taxes on the city's wealthy residents to help pay for improved public services, including an increase in the state corporate tax rates. and a two-percentage point rate hike on residents making over $1 million per year. However, he has not proposed a PA-Daer tax until now. Several countries have imposed versions of this tax. In a press release, the mayor's office said, quote,

Starting point is 00:05:02 The measure targets ultra-wealthy out-of-city residents and global elites who use New York City real estate as a vehicle for wealth storage rather than as homes, end quote. The release and a video from Mom Dani promoting the idea both singled out hedge fund manager Ken Griffin's $238 million P.A. Dautere in Manhattan as an example of the taxes targets. Later that day, Mamdani said the plan is a step toward a key campaign promise to raise taxes on the wealthy. He said, quote, I always said that I believed in the importance of taxing the rich. This is taxing the rich. A PA d'A. D'A. D'A. Tax has been something that has long been fought for in the city, but hasn't been possible to get over the finish line, end quote. By law, the mayor is

Starting point is 00:05:44 obligated to address the city's budget deficit, which totals approximately $5.4 billion. While the tax would only address a portion of that shortfall, Mamdani and Hockel say it would help the city move toward that goal without having to enact large-scale cuts to social services. The Democratic majority state legislature must pass the tax as part of the state budget currently being negotiated, but Democratic leaders in the state House and Senate responded favorably to the announcement. Critics of the plan and of wealth taxes more generally say the measure would impose undue burdens on wealthy New Yorkers who already pay high taxes and whose presence

Starting point is 00:06:18 in the city contributes to economy in myriad ways. Others warned that the plan could drive wealthy residents out of the city, while luxury real estate groups claimed it would hurt the industry. Today, we'll share views from the left and right on the PA. Dotter tax proposal and the taxed the rich movement. Then I'll pass it over to managing editor Ari Weitzman for his take. We'll be right back after this quick break. First up, what the left is is saying, most on the left support the tax, calling it a prudent way to raise government revenue. Some say the measure rightfully targets the ultra-wealthy's excesses. Others frame the tax as a win for Momdani and the Democratic Socialist movement. The New York Daily News editorial board called

Starting point is 00:07:17 the measure the right tax. Mayor Momdani wants the state to impose higher income taxes and corporate taxes, and Governor Hockel is wisely offering him a PA-Da-Daer tax. He is smart to take it. He should now also drop his calls for the other tax hikes. If a perennial concern with progressive taxation is the potential of driving well-off New Yorkers out of the city, this policy threads that needle by targeting people who are, by definition, not full-time New Yorkers. The people who have bought second homes or investment properties in New York City have done so precisely because it is the city that it is, a global hub of business and culture, meaning that an extra tax bump is something they'll eat happily. wealthy people with homes they own that they don't use a majority of the time,

Starting point is 00:08:01 from Trump to Russian oligarchs to Gulf Royals to more ordinary folks, and joy and benefit from the enormous services and amenities that the city offers. And their properties are only worth what they're worth as a result of the vibrancy created by the community around these properties, a community that needs the investment taxes can allow. Plus, it's only fair that if they're spending a significant chunk of their time not contributing to local economic activity and avoiding state and local taxes,

Starting point is 00:08:28 then they can pay a little bit more on their assets to even things out. In USA Today, Sarah Pekeno argued, Mamdani's Pia d'Ataire tax, proves you can really tax the rich. While progressives are celebrating the implementation of tax the rich policies, others are losing their minds over the possibility of people paying a tax on their multi-million dollar vacation homes and investment properties. It's hilarious that some netizens are so willing to go to bat for the wealthiest people in the world

Starting point is 00:08:54 who are driving up the cost of housing in New York City, especially those who don't live here. Why shouldn't the ultra-wealthy people who can afford a vacation home here have to pay for it? It doesn't seem to be the rich who can afford second homes being priced out of New York City. It's the people who are raised here who can no longer afford to call the city home.

Starting point is 00:09:13 More than 125,000 non-Hispanic black residents have left the city over the past 20 years, according to a 2023 analysis from Gothamist. Due in part to the city's affordability. crisis. Meanwhile, the number of millionaires in the city has grown by 45% over the past decade to nearly 385,000. In Jacobin, Liza Featherstone said the tax is a victory for Zoran Mamdani and the socialist movement. The announcement is a real victory for the socialist left and would never have happened without its tireless organizing to elect Mamdani, nor would it have happened without the

Starting point is 00:09:48 campaign to tax the rich, which has continued since he's been in office as New Yorkers have rallied, lobbied and relentlessly dogged the governor at public events. At the same time, the socialist movement is rightly viewing the new tax as a beginning, rather than an end of a longer project of redistributing the city's staggeringly unequal wealth and of building a New York where everyone can thrive. It's not too late to tax the rich more this year. Budget negotiations in Albany are not over. At present, lawmakers are mired in discussion on climate policy,

Starting point is 00:10:19 which Hockel wants to ignore, and car insurance, her favorite topic. so there's a long way to go before settling big questions of revenue. The left will continue to demand more redistribution and revenue, income and corporate taxes. Now for what the right is saying. The right strongly opposes the measure, with many arguing it is economically unsound. Some criticize Mom Donnie's tax-the-rich rhetoric. Others say the tax will drive away wealthy residents. The Wall Street Journal editorial board explored a New York tax on out-of-towners.

Starting point is 00:11:01 The details are still being worked out, but the Hockel administration says the goal would be to raise $500 million a year by taxing 13,000 homes. That's a big bite taken from a small number of people who might easily decide that keeping a place in New York isn't worth the cost.

Starting point is 00:11:16 Hockel said Wednesday, quote, they're part of our skyline, but those people are not part of our city, end quote. Got that longtime Manhattan banker or law partner who now has a primary residence elsewhere? New York's governor says you are not part of her city. Ms. Hokel's focus is supposed to be on improving the state so that they want to come back. Albany debated the PA-Da-Dataire tax in 2019, and there was concern it might crash the market for luxury properties.

Starting point is 00:11:43 The tax rates in that proposal ranged from 0.5% on value above $5 million to 4% above $25 million. According to a journal analysis, something like half of the revenue would have come from only 280 homes above the top threshold, with an average tax bill of $846,000. Their property values might have fallen by 46%. Class warfare is ugly as politics, but it's terrible as economics. And if New York drives away more wealth, voters won't like the result of living in a city that's downwardly mobile. The Free Press's editors argued,

Starting point is 00:12:18 scapegoating the rich won't fill a $5.4 billion budget whole. Economies stagnate when they're layered with policies that slowly sap their productivity and orderliness, Some red tape on business here, budget cuts to policing there. That's what New York City mayor, Zoran Mamdani, is risking with his latest tax proposal. Momdani signals out billionaire financier Ken Griffin in the video, exclaiming the $238 million price tag of his penthouse and putting the building on camera. It's as if to say, there's the enemy New Yorkers looking down on you from his spare palace.

Starting point is 00:12:51 The heckling is akin to the current wave of eat-the-rich progressivism, which is pushing Democrats everywhere to embrace wealth taxes and has even turned deadly on the movement's fanatical fringe. Luigi Mangione's alleged murder of United Healthcare CEO appears to have been motivated by a similar kind of two-dimensional view of how the rich relate to the masses. The purpose of the tax may not be to pay for anything at all. By pushing it forward, Momdani is keeping a promise to supporters via signaling.

Starting point is 00:13:19 It's politically savvy but economically risky. In city and state New York, New York City, Republic Republican council member Joanne Ariola wrote, I'm not a millionaire, but I'm against, more taxes on the rich. The highest tax bracket in New York is already shouldering nearly half of the income tax burden in the state. This is an enormous share and provides us with much-needed funding for an array of programs in public works. But when the members of this tax bracket change their address and stop paying their income taxes to the Empire State, the government will be left with no other option than to push that burden down to the middle and working classes.

Starting point is 00:13:55 If we want to actually expand the tax base and bring more money into the city, we need to provide incentives for the wealthy to return. Because, as the numbers show, many of those with the means to do so will and are simply packing up and moving just across state lines. And this leaves the working classes and the middle-class civil servants who are too invested in the city to just up and leave, shouldering the burden. Eventually, if we keep adding more taxes, we will run out of rich people's money. That's it for what the left and rider saying,

Starting point is 00:14:25 Now back to Ari for his take. Thanks, Audrey. Tax policy is complicated, and despite the simplicity of the message from Governor Hockel and Mayor Mabdani, their joint proposal really is no exception. But by and large, I think they've got a great idea, in theory. Now, execution will be everything. Philosophically speaking, I'm a fan of progressive tax policies. And by progressive, I mean just that.

Starting point is 00:15:03 people who make or earn more are taxed progressively more on each dollar they get. That feels fair to me. I don't know if this policy will raise the $500 million that Hokko and Mumdani say that it will, and it definitely doesn't solve the city's entire budget problem. But I also don't think it will have the large problems a lot of this idea's critics say that it will. Remember, this policy is targeting part-time residents who already demonstrated that they will pay at least $5 million once and $60,000 in taxes every year to take advantage of what New York City has to offer. I really doubt an additional $30,000 annually will meaningfully change the behaviors of people in that category. In fact, I called for almost this exact policy in January when I was responding to President

Starting point is 00:15:50 Trump's proposal to raise the tax rate on corporate investors, saying we should instead increase the tax rate on second homes, specifically at local levels, like New York. I argued that targets of such a policy should be, quote, very wealthy people who already own and live in a primary residence, but also own vacation properties that are often vacant in areas with housing shortages, end quote. And I added that doing so would increase both revenue and supply by acting as a disincentive to owning investment properties. I've been harboring this idea for a while, and after writing about it and Tangle, I got a lot of really well-reasoned pushback to it. Now that Mimdadi and Hoko are considering doing this in the real world, I want to test their proposal against the pushback that I received. First, this should really only be considered a revenue-raising tool, not one that would impact

Starting point is 00:16:37 housing availability. When I pitched my idea to tax second homes, I optimistically stated that I could see people who buy up rental properties getting dissuaded from doing so or being motivated to rent those properties out. Counter arguments have convinced me that that likely is not the case. Second homes make up only 4% of U.S. housing stock, a figure that's decreasing, and many of these properties are already rented out. Increasing taxes on those homes could have a marginal effect on encouraging more local home ownership, but likely contribute only to raising rents. But let's put a pin in that rent-raising idea for now.

Starting point is 00:17:14 Mondani and Hocor are pitching this as a revenue-raising policy, so they're already ahead of me. And that breaks me to my next point. Additional taxes on expensive second homes already exist to one degree or another. In Vermont, where I live, the state offers a homestead tax exemption for people who live in their primary residence. This means my home state already taxed a second homes at a higher rate. They just frame doing so as a discount to residents of their primary homes. Vermont is not alone in this. 37 other states offer similar exemptions, and that includes New York.

Starting point is 00:17:48 However, in New York, it's a marginal policy only offering annual tax savings of $293 total for most homeowners. So while a similar policy in other states effectively isn't extra tax on second homeowners, that's not the case in New York. But that doesn't mean that New York doesn't already tax these properties to a high degree. New York City divides its properties into four categories, one of three-unit residences, properties with more than three units, utilities and then all other properties in bucket four. Those properties are then taxed at different rates complicating the existing tax policy.

Starting point is 00:18:26 Here we're just going to talk about classes one and two. Class one properties, which are basically single family homes or small apartment buildings, are taxed at 19.84%, while class two properties, which are large rental buildings and investment condos, are taxed at 12.44%, which is much lower. However, class one homes are taxed at only 6% of their value while class 2 properties are taxed on 45% of their value, which is much, much higher. That makes the effective tax rate of these class 1 properties, in effect, lower. So in total, it's 1.2% of market value for class 1 properties, the smaller single family homes, compared to 5.6% of market value for these larger apartment buildings. Okay, so I just gave you a lot of numbers.

Starting point is 00:19:17 maybe it's helpful to go through an example. Say I own a $5 million, four-story brownstone in New York City. If I'm the owner and occupant of that property, I'm only assessed taxes on 6% of its value or $300,000. My tax rate of 19.84% means I pay about $60,000 in taxes total, an effective rate of 1.2%. If I break my property to four units and rent them out,

Starting point is 00:19:43 I'm assessed taxes on 45% of the building's value, or $2.25 million. My tax rate of 12.44% means I pay about $280,000 in taxes, an effective rate of 5.6%. That's a difference of well over $200,000 in annual taxes between Class 1 properties and Class 2 properties. All right, biggest side. But what would the Pietitera tax apply? Okay, that's the biggest side.

Starting point is 00:20:12 But would the Piettaire tax apply to properties that are identified as Class 1? or class two. As it stands today, that depends a lot on the individual property. If it's the former, then great. A surcharge on these properties can help raise revenues on a set of people that can afford it and who aren't already paying as much in taxes as a landlord of an average small building in New York City. And that's a cost that gets distributed among the residents. But if it's the latter, then the surcharge essentially becomes a double tax on people who are already paying a great deal for their properties. So far, the Pietaterra proposal isn't very specific on its application.

Starting point is 00:20:50 And I can understand that. It's early in the proposal that eventually gets introduced to the legislature will have to fall somewhere between the catchy tax on $5 million oms owned by people who don't actually live here and the complicated reality of implementing it with the existing tax code. So when we get to the eventual policy, I hope that it actually ends up looking something like this. one, clarify the classifications.

Starting point is 00:21:16 Piettaire's owned by out-of-state millionaires and real estate investors don't make sense as class one properties anyway, because these owners shouldn't receive the benefits intended for most homeowners. However, Pietitaires aren't a great fit as class two properties either, which is meant to encompass large residences and apartment buildings. If a $10 million brownstone gets put into the same category as a 200-unit apartment building, then future changes to the tax code were either raise rents for the working class or keep taxes down for the rich. Instead, investment properties, pediatares of luxury apartments, would be better suited in their own new category.

Starting point is 00:21:55 Second, tweak the rates don't apply new charges. If these properties are simply put into their own bucket where the assessment rate is about as high as class twos and the tax rate is about as high as class ones, that I think Hockel and Mimdani accomplish the revenue target they want while keeping the code relatively simple, avoiding unintended regressive consequences and without applying targeted thresholds. By that I mean a $5 million pietta tear attack sounds catchy, but creating sharp cliffs like that both leaves money on the table. For instance, you could be taxing the people who own $4 million piettares too,

Starting point is 00:22:30 and it creates a line for investors to avoid. Instead, using stepwise increases within the sales, new classification would generate more revenue, allowing us to tax homes that are over $10 million more and thus be more progressive. Third and last, just cut the personal tax. This is more of a messaging note, but the way the policy is messaged is a central part of it. As the free press editors wrote under what the right is saying, filming marketing material outside one person's house makes them the single target for class resentment, and it creates

Starting point is 00:23:04 a genuinely dangerous environment. Mondani is playing up class resentment in a way that we've seen fail to deadly effect with political extremism. People like Ken Griffin shouldn't be treated as enemies while you're asking for more money out of them. Ultimately, the devil will be the details. New York has a potentially great idea on its hands, one that could increase its tax revenue while having a minimal impact on full-time New York City residents.

Starting point is 00:23:32 And I'll be very interested to see how this idea evolved. over time. That's my take on it. So I'm going to pass it over to our executive editor, Isaac, who, surprise, surprise, disagrees with me. Go ahead, Isaac. Tell them what you got. Hey, guys, Isaac here. I disagreed with Ari on a policy proposal like this in January when it was proposed to make housing more affordable, and I disagree with it now as a scheme to find more revenue. The best tax schemes are the ones that are fair, simple, and enforceable. This is none of the above. Fairness. The top 1% of New Yorkers already pay roughly 40% of city income taxes, and they're already taxed at a higher rate than middle class New Yorkers.

Starting point is 00:24:21 Simplicity. New York City's property tax regime is deeply dysfunctional as is, and a new surtax would add another layer of complexity and volatility to the city's tax. If you want to raise property taxes on expensive homes, just raise taxes on the top one or two percent of homes. New York City's effective tax property rate is actually higher for working class people than the rich, which is a problem that should be corrected. Enforceability. Primary residents in New York is already a multi-factor domicile test that is elaborate and hard to enforce. It is also already a huge source of litigation. This is sure to invite more primary residence fights and lawsuits, and that's without even considering that many of these luxury tax properties

Starting point is 00:25:06 are owned by LLCs or family trusts, which will require even more tax registry categories and enforcement mechanisms. Without even touching the mayor's creepy joker-esque video framing Ken Griffin, who's committed no crime and is accused of no wrongdoing as a bad guy, the policy is less a straightforward scheme to make the wealthy pay their fair share than it is a complicated, unenforceable tax mess that sounds good on paper, but will not work in practice. All right, that is it for my take. I'm going to send it back to Audrey for the rest of the pod, and I'll see you guys tomorrow. Peace.

Starting point is 00:25:46 We'll be right back after this quick break. Now it's time for one of our new segments on this day in history. Today is Earth Day, so we're going to take a look back to see how that designation began. On April 22nd, 1970, thousands of college campuses nationwide held classes, demonstrations and protests to raise awareness of industrial air and water pollution, a concern popularized in part by Rachel Carson's 1962 novel Silent Spring. 20 million Americans, roughly 10% of the U.S. population at the time, took part in the event. Behind the effort was Wisconsin Democratic Senator Gaylord Nelson, who recruited California Republican Senator Pete McCloskey to serve as

Starting point is 00:26:34 co-chair, an activist Dennis Hayes, to organize the campus rallies. Senator Nelson originally proposed, calling the event environmental teaching. But by the time April 22nd rolled around, organizers and national media had widely adopted Earth Day, a name coined by legendary advertising writer Julian Koenig. In an address to a crowd in Denver, Colorado on the first Earth Day, Senator Nelson said, quote, Our goal is a new American ethic that sets new standards for progress,

Starting point is 00:27:03 emphasizing human dignity and well-being, rather than an endless parade of technology that produces more gadgets, more waste, more pollution. And finally, here's our Have a Nice Day story. With 18,000 landmine-related deaths in Cambodia in the past half century, one nonprofit has turned to using rats, whose small size and powerful sense of smell allow them to locate hidden mines quickly and safely. One of these rats, Magawa, stood above the rest,

Starting point is 00:27:33 locating over 100 mines in his five years' career. He died in 2022, and earlier this month, Cambodia unveiled a seven-foot statue to honor his work. Michael Raine, a program manager at the nonprofit, said, quote, Magawa was one of the best rats we've ever had. Magoa was calm and focused. He was gentle and friendly with his handlers. He just had the perfect temperament. The Washington Post has the story, and you can find it in the show notes. All right, everybody, that's it for today's episode. Remember, if you'd like to support our work, go over to reetangle.com to sign up for our membership. And if you do so within the next 25 hours, you could get 25%

Starting point is 00:28:14 off a total bundle for podcast and newsletter. Check it out at retango.com. Support everything we do. We love having you here. So glad you take the time to listen to us. We'll be back in your ear tomorrow. Until then, take care. Our executive editor and founder is me, Isaac Saul, and our executive producer is John Wall. Today's episode was edited and engineered by Dutie Thomas. Our editorial staff is led by managing editor Ari Weitzman with senior editor Will Kayback and associate editors, Andre Moorhead, Lindsay Canuth, and Bailey Saul. Music for the podcast was produced by Diet 75. To learn more about Tangle and to sign up for a membership,

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Tangle - Mamdani's "tax the rich" proposal.

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