President Donald Trump made another bold proclamation that has left many protesting,
yet again, that he is attempting to overreach the authority of the federal government, this
time aimed at his hometown. Trump decried the recently passed “pied-a-terre” tax
implemented by the New York state legislation and fostered by New York City Mayor Zohran
Mamdani.
The tax is a levy on nonprimary residences of wealthy property owners in New York City. In
a post on Truth Social, Trump called the tax a “dangerous political ‘experiment’ in New York
(that) will destroy what was once a great city and state.”
Trump added that it was hard for him as president to “sit back and watch it happen, to a
place I once loved”.
Trump is, of course, a native New Yorker who lived in a penthouse located in Trump Tower in
Manhattan but moved his primary residence to Mar-a-Lago golf club in Florida in 2019. It is
not clear whether Trump or his immediate family would be subject to the New York City tax.
Trump also claims that the levy on second homes is spurring thousands to leave the city
and thus cancelling out the potential revenue expected by the plan.
Mamdani, a proclaimed democratic socialist, has been adamant since his election that the
city’s richest residents need to pay more in taxes.
Trump’s announcement came one day after a Staten Island judge ruled to block the new
policy. New York City government quickly filed a motion to seek an appeal for the order,
placing the judge’s ruling on hold.
“We are confident in our position,” Mamdani said. “And that is a confidence coming from
both the legality of the City’s actions as well as the importance of a surcharge on
secondary homes worth more than $5 million, a surcharge that will help fund safer streets,
that will help fund stronger schools, and it will help fund the city that New Yorkers deserve.”
The pied-à-terre tax backed by Mamdani and New York Governor Kathy Hochul would raise
taxes on second properties valued at $1 million or more, with more valuable residences
facing higher rates.
High profile business owners, such as Citadel CEO Ken Griffin, threaten to move his
business to Florida after Mamdani featured his uber-swank property in a video defending
the tax. Others have not been as vocal, since New York already boasts one of the highest
income tax rates in the nation, and has fewer millionaires than the past, according to
reports.
Mamdani claims the policy will raise $500 million in revenue, though NYC Comptroller
Mark Levine said the estimated revenue is more likely to fall within the $340-$380 million
range.
The bottom line, however, is that Trump has little if any power in which to intercede in a
state tax issue. He simply cannot nullify a state tax by executive order. The Justice
Department could intervene in the litigation surrounding the tax; however, the Tax
Injunction Act would curtail the effort.
Congress, however, has more power over state taxation than the Executive Branch. Though
Congress would still need a constitutional basis for such actions—and given the make-up
of Congress and the fact that real property taxation lies at the core of traditional state
authority, any such action seems unlikely.
Also, New York’s pied-à-terre tax is drafted to avoid the most obvious constitutional
collision in the first place—the Supreme Court has invalidated property-tax discrimination
under the dormant Commerce Clause, but New York distinguishes between uses rather
than residents and outsiders. Thus, an apartment owned by someone in say, New Jersey,
can qualify for an exemption if it is used as a primary residence. But a New Yorker’s second
home can be taxed.
This is on the heels of New York enjoying a period of renewed energy and reported
excitement this summer, buoyed by the Knicks winning their first NBA championship in over
50 years and the most attended World Cup event in July.
Aside from the flood of greater tourism from all parts of the globe, AI entrepreneurs are said
to be feasting on Manhattan office space, as the city remains America’s biggest magnet for
young professionals chasing careers from finance and media to law and AI. Young
professionals seem to be willing to stretch themselves with exorbitant rents to facilitate
networking within a short walk, as opposed to online.
And while Democratic socialist Mayor Mamdani has continued to push his “tax the rich”
proposals, he has shown some pragmatism in keeping a tough police chief and cutting red
tape to help small businesses.
Although his move to open five municipally owned grocery stores has brought a pair of
lawsuits from the Multicultural Business Coalition, which says it represents hundreds of
small supermarkets. The lawsuits argue that Mamdani’s plan violates the civil rights of
smaller, immigrant-and-minority owned businesses, and that the smaller grocers would
not be able to match the discounts offered at a city-owned grocery store, thus putting them
out of business.
Still, crime rates have reportedly dropped, as in the first half of this year murder numbers
hit an all-time low, and net international immigration remains positive despite the
immigration crackdown.
The city has seen a revival in booming box-office revenue on Broadway, big ticket
entertainment generating record draws and a reinvigoration of the local restaurant scene.
And while younger residents continue to move in and grapple with the ridiculous rents,
older people do not, as the overall affordability of the city remains very challenging. The old
flaws persist, as oversized garbage bags still dot city corners, and everyday retail prices
remain very high, whether at the local bodega grocery or convenience store.
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