The boom in multimillion-dollar real estate sales in New York has plenty of critics. But there is one group that's cheering: New York politicians.
According to the New York state Department of Taxation and Finance, collections from the state's so-called mansion tax—a 1 percent levy on homes sold for $1 million—reached a record $259 million in the 2012-2013 fiscal year. That's up 22 percent from the previous fiscal year and up 47 percent from the market bottom in 2009-2010.
As its revenue has grown, so has its share of critics. Many argue that the mansion tax, first imposed by Gov. Mario Cuomo in 1989, should be adjusted for real estate inflation. Brokers say that a $1 million apartment in 1989 would be sold for about $1.9 million to $2 million today.
And while $1 million may get you a mansion in Binghamton or Erie, it can barely buy a one-bedroom in Manhattan. (In Manhattan, it might be time to rename it the "lavish studio apartment" tax.)
Not surprisingly, the mansion tax is universally hated by the real estate industry.
"It's arbitrary," said Duncan MacKenzie, CEO of the New York State Association of Realtors. "And it artificially depresses the market."
It's hard to know how much the tax depresses the market—or even if it does. But a recent study by Wojciech Kopczuk and David J. Munroe of Columbia University found that the tax creates "bunching:" a large grouping of homes priced just under the tax threshold.
A look at how much tax has been collected over time:
