HomeMy WebLinkAboutCOM 0926.011 2018-2020 4
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From: Nate Gaddis <nate@elitepacific.com>
Sent: Tuesday, May 12, 2020 9:09 AM
To: Council Testimony
Subject: re: requested modifications to Bill 169 - Chapter 19 amendment
Attachments: exploring-the-viability-of mansion_tax_approaches_19.pdf
Aloha Council Chair Chung and members of the finance committee,
I would like to voice support in principle to Bill 169, as I do believe we can employ a luxury-class tax premium
with minimal migration of buyers to other communities.
However,I feel this tax increase should be spread across a broader tax base. The negative effects of the
.headlines it will generate (and it will generate headlines that single out the Big Island) are not currently
outweighed by the meager revenue this tax is expected to bring in.
There is no justifiable reason this tax increase could not be spread across properties for example with assessed
valuations over $1 million (I would recommend a tiered approach, with a lower rate increase for properties
between$1 and 2 million).
Presuming you were to enact such a change, you could of course examine either exempting primary residences
for that property category, or building in a process for hardship exemptions. We do have primary home owners
in that property class struggling to make ends meet, on occasion (rare as that may be... it does happen).
If legally permissible, any such increases should have clearly identified "spending categories" where funds
raised can be spent (public employee wage inflation should not be one of these in my opinion - as it would be
vastly unpopular), and a sunset provision should be included to allow the government to reassess the policy,
examine its effects, and change course in the event of unintended consequences.
I'm attaching a study on "mansion tax" policies and their estimated effects, done by the Urban Institute in 2018.
Mahalo,
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RESEARCH REPORT
Exploring the Viability of
Mansion Tax App roaches
Jung Choi Bhargavi Gonesh Sarah Strochak Bing Boi
May 2018
— URBAN
N S T I T U T 8 I L E V AV E V K I lP IE 8 A T E
. . I N S T U T U T@
The nonprofit Urban Institute is a leading research organization dedicated to developing evidence-based insights
that improve people's lives and strengthen communities.For 50 years,Urban has been the trusted source for
rigorous analysis of complex social and economic issues;strategic advice to policymakers,philanthropists,and
practitioners;and new,promising ideas that expand opportunities for all.Our work inspires effective decisions that
advance fairness and enhance the well-being of people and places.
Copyright O May 2018.Urban Institute.Permission is granted for reproduction of this file,with attribution to the
Urban Institute.Cover image by Tim Meko.
Acknowledgments iv
Exploring the Viability of Mansion Tax Approaches 1
Mansion Taxes in the United States 2
Data and Methods 3
Results q
Property Tax Analysis q
Transfer Tax Analysis 7
Discussion g
Choosing the Right Thres hold 9
Determining Which Property Types to I ncl ude 9
Assessing Property Values at Market Rates 9
Potential Impact on the Real Estate Market 10
Conclusion 11
Appendix 12
Property Tax Analysis 12
Transfer Tax Analysis 17
Notes 21
References 22
About the Authors 23
Statement of Independence 24
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This research report was commissioned bythe Economic Security Project.
The views expressed are those of the authors and should not be attributed to the Economic Security
Project or the Urban Institute,its trustees,or its funders.Funders do not determine research findings or
the insights and recommendations of Urban experts,Further information on the Urban Institute's
funding principles isavailable aiwvvw.urban»rQ/suVport.
The authors thank Kim Rueben of the Urban-Brookings Tax Policy Center,who provided her expertise
inreview ofthis paper.
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M a ns*o�
With the recent passage of the Tax Cuts and Jobs Act and growing fiscal pressure on state and local
governments,exploring revenue ideas through the tax code is timely.Many jurisdictions face budget
crises and are searching for new ways to fund social programs.Several states have considered tapping
high-priced residential real estate as a source of revenue.One method is a mansion tax—in other words,
real estate transfer taxes and property tax surcharges on the most expensive homes in a state.So far,
few states have used a mansion tax,but it is a potential new source of revenue and an avenue worthy of
further exploration.In New York City,for example,Mayor Bill de Blasio has proposed an additional tax
on luxury homes to support affordable housing efforts.The measure would build on New York State's
existing real estate transfer tax on residential properties sold for at least$1 million.
We conducted an exploratory analysis that estimates the potential revenue generated from two
types of taxes on high-value residential properties:areal estate transfer tax and a property tax
surcharge.Areal estate transfer tax falls on the sales price at the point of transaction,while a property
tax falls on the assessed property value.In the US,only two states,New York and New Jersey,currently
enforce transfer taxes on luxury home sales.So far,no states have levied a property tax surcharge.In
this report,we use the term"mansion tax"to encompass both transfer taxes and property tax
surcharges on high-priced,luxury homes.We estimate the tax revenue that could be generated in
California,Colorado,the District of Columbia,Maine,Massachusetts,Michigan,Nevada,New York,and
Washington.The transfer tax analysis was conducted for 2015 and 2016 real property sales
transactions,while the property tax analysis was conducted on the most recent listed assessment
values and adjusted to market values where applicable.Our analysis compares the revenue generated
at different value thresholds for the tax surcharge.The amount of revenue generated and the feasibility
of imposingthese taxes will depend on the tax laws and revenue limits or restrictions in each state.
Many of the examined states have limits in place;California and Colorado have some of the strictest.
Our analyses show that the stock of high-priced luxury homes varies widely across states.I n both
the property tax analysis and the transfer tax analysis,California is expected to generate the largest
total tax revenue.However,Colorado had the highest property tax revenue per capita.State
policymakers must considertheir individual housing markets when setting thresholds for a mansion tax,
to ensure that the revenue generated meets expectations.They also need to consider how this policy
tool would interact with existing state tax limits and the Tax Cuts and Jobs Act,which I imits the
~
deductibility of state and I ocal taxes but provides certain tax advantages to wealthier taxpayers.
Additional taxes,comingjust after the new tax law,raise concerns of higher-income taxpayers moving
to states with lower tax rates.However,the evidence on tax migration is weak.A recent study,which
examined 45mill ion tax records for Americans earning$1million ormore,found that mil|ionainesare
not very mobile and that tax flight only occurs"at the margins of statistical and socioeconomic
significance"(Young etal.2O16).
Mansion Faxes ^n fh e United Sttes
No state has implemented a property tax surcharge,and some states do not permit different taxes for
diff erentproperty types.Currently,35states'and the District ofColumbia impose transfer taxes on
residential real estate transactions,and some taxes vary by assessed value.But only NewYork and New
Jersey have mansion taxes.New York State implemented the f irst mansion tax in 1989,in response to
an economic recession.2 The state levies-an additional 1 percent tax rate on residential transactions of
$1million ormore.This tax ispaid bythe buyer and isnot tax-deductib|e.
In 2015,New York City Mayor Bill cle Blasio proposed two additions to the state mansion tax,for
properties inNewYorkCity only:
1. A1percent mansion tax onproperty sales over$1.75million
2. Anadditional 1.5percent marginal tax for property sales over$5million
This proposal would raise the city's 1 percent tax threshold from$1 million to$1.75 million to
reflect housing price increases,while generating additional revenue from the 1.5 percent marginal tax.
The plan was projected to raise$180to$200 million for investments in affordable housing,but was
never passed.In 2017,cle Blasio announced anew plan to place a 2.5 percent property transfer tax on
residential sales above$2 million to fund affordable housing for 25,000 senior citizens.3
In 2004,New Jersey introduced al percent mansion tax on properties sold at over$1 million.
Unlike New York's mansion tax,which only applies to residential properties,New Jersey's mansion tax
applies tocommercial properties aswell.
In 2015,Rhode Island considered a mansion tax on second homes—the so-called Taylor Swift tax—
but eventually dropped it.This statewide property tax was designed to help close the state's$190
million budget deficit,but it faced strong opposition,especially from the Rhode Island Association of
Realtors,who argued that the tax would discourage potential buyers from purchasing vacation homes in
the state.4
This paper does not deal with the political arguments for and against mansion taxes.Instead,we
focus on how,and how much,revenue these taxes could generate in various states.Below,we describe
the data and methods used to estimate the revenue that could be generated from a transfer tax or
property tax surcharge in selected states.
Data and Methods
We used data from state property records to estimate the total value of luxury residential properties.
Our analysis was restricted to single-family residential properties,including condos but excluding co-
ops and luxury rentals.For each state analyzed,we conducted a property tax surcharge analysis on the
most recent listed assessment value price.Where assessment value was regulated to be a percentage of
the market value,we adjusted assessment values to reflect market values.In all other cases,we left the
assessment value as is—including California,where the assessment value cannot increase by more than 2
percent from year to year until the property is sold.We conducted a transfer tax analysis on the sales
prices of transactions completed in 2015 and 2016.
Each tax analysis used two sets of luxury home threshold definitions.Forthe propertytax
surcharge analysis,we used the market values(described above),and for the first part of the property
tax analysis(Case 1),we determined the number of residential properties in the top 1 and top 2 percent
of assessed values.We then calculated the combined revenue generated from a 1 percent tax on
properties in the top 2 percent of market values,and a 2 percent tax on properties in the top 1 percent
of market values.For the second part of the property tax analysis(Case 2),we selected the total number
of properties assessed at or above$2 million and$5 million.Using market values,we calculated the
combined revenue generated from a 1 percent tax on properties over$2 million and a 2 percent tax on
properties over$5 million.For each state,we compared results for the two cases,as shown in tables 1
and 2.Forthe transfer tax analysis,we applied the same procedure but used a subsample of sales
transactions completed in 2015 or 2016.
4 '�EXPL'laRINGnTi�HE:U(�A6111i�TY%QF NIANSION��iT�1X APPR4AGN'E�S. . 3-,
Results
n�^.�[]n��
The property tax analysis was completed for New York,Maine,Massachusetts,California,Michigan,
Colorado,and the District of Columbia.We did not conduct a property tax analysis on Washington State
because its constitution requires all property to be treated as a si ngle class and thus taxed at the same
rate.We included Colorado,even though its constitution bans a statewide property tax,because the
state's constitution can be amended by ballot measure;Washington's constitution can only be amended
by statute.The transfer tax analysis was completed for Massachusetts,Cal ifornia,Michigan,
Washington,Colorado,and the District of Columbia.Maine was excl uded from the transf er tax analysis
because it is a nondisclosure state,meaning sales prices are not reported in public records data.New
York was also excluded fromthe transfer tax analysis.
The differences in revenue across states can be explained by differences in the size and composition
of the states'housing markets.Eligibilityfor the proposed property tax surcharge and transfertax
differed greatly across states.Asexpected,the cutoff point forthetop 1percent and top 2percent of
properties varied across states.The number of homes above the 1 percent,2 percent,$2 million,and$5
million thresholds was also different in each state.Below is a discussion of the potential revenue
generated in each state and the unique conditions in each state's housing market.
Property Tax Analysis
Table 1 shows that potential revenue generated by a property tax surcharge differs substantially across
states.Cal ifornia—home to high-growth cities San Francisco,San Jose,and Los Angeles—generates the
most revenue f rom implementing a property tax surcharge,followed by New York,Though California
stands to gain twice as much revenue as New York,California's population is also nearly twice as large
as New York's,I Maine,Nevada,and the District of Columbia have the lowest expected revenues.DC is
much smaller than Maine and Nevada but has signif icantly higher per capita revenue.
Tabl e 1 also shows that potential revenue diff ers by the two luxury home threshold definitions.I n
all states,Case 1(tax on top 1 percent and 2 percent of homes)generates more revenue than Case 2
(tax on homes sold for at least$2 million and at least$5 million).The difference between Case 1 and
Case 2 revenues is greater in states with lower average home values,such as Michigan and Maine.This
suggests that states and localities should considertheir unique housing market conditions,including
average home prices,to set appropriate thresholds forthe property tax surcharge.
t
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TABLE 1
Revenuesfrom Property Tax Surcharge
States Total revenue Per capita revenue
Case 1
California $7,629,032,934.88 $194.37
Colorado $1,656,573,599.00 $298.99
District of Columbia $131,130,264.22 $192.51
Maine $197,023,803.00 $147.97
Massachusetts $1,421,295,224.00 $208.65
Michigan $975,660,460.12 $98,27
Nevada $387,536,092.43 $131.81
New York $3,579,551,888.00 $181.29
Case 2
California $4,251,959,427.44 $108.33
Colorado $1,023,241,200.13 $184.68
Districtof Columbia $74,336,262.16 $109.13
Maine $29,405,308.00 $22.08
Massachusetts $618,578,734.00 $90.81
Michigan $69,672,010.28 $7.02
Nevada $84,483,865.72 $28.74
New York $1,623,557,469.00 $82.23
Notes:Case 1 is a 1 percent tax rate for the top 2 percent of homes and a 2 percent tax rate for the top 1 percent of homes.Case 2
is a 1 percent tax rate for homes worth$2 million or more and a 2 percent tax rate for homes worth$5 million or more.
Table 2 presents detailed revenue calculations for California and Colorado.(Calculations for all
analyzed states can be found in the appendix.)To impose a mansion tax,both states would have to pass
legislation to change existing revenue limits.
i'i�,,iEXPLGRIBILIITY.OF MAN' I¢Nli�fA�X;,APPROACN'ES ,5,,,
TAGLE2
Revenues from Mansion PropertyTuxSurcharges
California Colorado
Total residential properties 8,284,512 1,683,139
Total value $3,127,563,928,268 $537,154,597,839
Case
Top 1%threshold $2.086'019 $2.023.744
Top 2%threshold $1.531.395 $1.187.198
Total homes intop 1% 82,846 16.885
Total homes intop 2% 165.691 33.664
Total market value ofhomes intop 1Y6 $308.451.727.216 $70.219.070.264
Total market value ofhomes intop 2% $454,451`566.272 $95,438.289,636
PmpeMvtaxrevenue $7.629,032.935 $1'656.573.599
Population(2016) 39'250.017 5'540'545
Property tax revenue per capita $194.37 $298.99
Case
Total homes�$5million 11.597 3.820
Total homes 2:$2million 90.601 17`142
Total market value ofhomes 2:$5million $100.903.637'989 $31.487.463.543
Total market value ofhomes?$2million $324.292,304,755 $70.836,656.470
Property tax revenue $4.251.959'427 $1.023'241'200
Population(2016) 39.250.017 5.540,545
Property ti1 $20833 $18468
Notes:Case 1 is a 1 percent tax rate for the top 2 percent of homes and a 2 percent tax rate for the top I percent of homes.Case 2
isazpercent tax rate for homes worth$2 mi Ilion or more and a 2 percent tax rate for homes worth$5 million or more.
I n California,the threshold f or the top 1 percent of homes was$2.1 mil lion,and the threshold for
the top 2 percent of homes was$1.5 million.Because of the state's size and home price appreciation,
California has the most eligible properties of all the states we studied:82,846 homes in the top 1
percent and 16S.691homes inthe top 2percent.But only 11,597homes sold for atleast$5million,and
90,601 homes for at least$2 million.This explains the difference in revenues generated bythe two tax
cases.
I n Colorado,Aspen and Denver,which have many high-priced homes,drive upthe eligibility
threshold forthe property tax surcharge.The threshold forthe top 1 percent of homes was$2.0 million,
and the threshold for the top 2percent was$12million,with 16.835and 33.h64eligible properties
respectively.
In Case 1 and Case 2,Colorado's per capita property tax revenue is significantly higher than
California's.Colorado is also expected to generate the most per capita revenue amongthe eight states
intable l.
The results reflect state regulations in California and Colorado.California Proposition 13 mandates
that the assessment value of a given property cannot increase by more than 2 percentfrom yearto year,
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until the property is sold.Thus,we could not adjust California's assessed values to reflect market values.
I
Under Proposition 13,parts of California that have experienced rapid growth,such as the Bay Area,
have assessed values well below market value.Colorado's Taxpayer's Bill of Rights has had a significant
influence on the state economy(McGuire and Rueben 2006).This provision restricts overall revenue
growth and would need to be amended for the state to generate more tax revenue;undercurrent law,
the state would need to either lower other taxes or remit funds back to taxpayers.
Transfer Tax Analysis
Table 3 shows that transfer tax revenues differ significantly across states.California would generate the
most revenue from a mansion transfer tax.In several states,the difference in revenues between Case 1
and Case 2 is smaller than the difference shown in table 1,indicating that assessment values are lower
than transaction values.This is because the assessment value of properties where owners have a long
tenure may not be entirely up to date.In each state studied,the total sales counts and tax eligibility
thresholds were similar for 2015 and 2016.
TABLE 3
Revenuesfrom Mansion TransferTax
California Colorado DC Michigan Massachusetts Nevada Washington
Case 1
2015 $647,963,506 $88,257,862 $8,732,871 $42,260,565 $83,604,650 $34,258,142 $89,457,780
2016 $620,583,229 $82,489,568 $10,201,427 $41,456,614 $88,421,233 $35,450,576 $98,540,430
Case 2
2015 $545,093,163 $32,845,127 $5,249,982 $781,265 $42,897,615 $7,223,449 $23,972,460
2016 $500,046,703 $27,116,316 $6,251,002 $771,578 $44,254,008 $7,692,743 $27,456,789
Notes:Case 1 is a 1 percent tax rate for the top 2 percent of homes and a 2 percent tax rate for the top 1 percent of homes.Case 2
is a 1 percent tax rate for homes worth$2 million or more and a 2 percent tax rate for homes worth$5 million or more.
Table 4 shows detailed revenue calculations for California and Colorado.Tables for the rest of the
analyzed states are in the appendix.
'EXPLOR N:GiJH1E=VIABILITY OF MANIS.IQNI'TAX'APP, OACHES
T4BLE4
Revenues frumMansion Taxes
California Colorado
Total properties sold 506,294 132,93
Case
Top 1%threshold $2'825,000 $1.434.790
Top 2%threshold $2.100.000 $1.069'180
Total homes intop 1% 5.081 1.330
Total homes intop 2y6 10.296 2.659
Total market value ofhomes intop 1Y6 $24'770'457,857 $3,309.761.785
Total market value ofhomes intop 2% $37.287.865.104 $4.939.195.089
Transfer tax revenue $620'583'230 $82.489.569
Population(2016) 39.250.017 5.540.545
Tmnsfertaxrevenue percapita $15.81 $14.89
Case
Total homes�:$5million 1.258 88
Total homes?:$2 million 11.065 559
Total market value ofhomes 2:$5million $11,138`400,056 $687.867.796
.
Total market value ofhomes�:$2million $38.866.270.307 $2.023.763.860
Transfer tax revenue $500'046,704 $27.116,317
Population(2016) 39.250.017 5.540.545
Transfertaxrevenue percapita $1274 $489
Notes:Case 1ioa1percoottax,atrm,the top zpercent mhomes and azpenen/tzmm»o,o,metnpzpenentmhomes.Case 2
is a I percenttax ratefor homes worth$2 million ormore and a 2 percent tax ratefor homes worth$5 million ormore.
In California,the threshold forthe top 1 percent of homes was$2.8 million and the threshold for the
top 2 percent$2.1 million in both years,and sales totaled about 500,000 each year.I n Colorado,the
threshold for the top I percent was$1.4 million,and the threshold for the top 2 percent was$1.1
million,with 1,330 and 2,659 eligible properties respectively.Estimated propertytax revenue per
capita was higher in Colorado,but transfertax revenue per capita was higher in California.This reflects
significant increases in California's home prices overthe past several years and Proposition 13's limits
onassessed values.
Discussion��Us��[jssUoKl
States must consider many details in the design and implementation of a mansion tax,including whether
the tax will be imposed at the state or local level.State statutes,constitutional restrictions,and
limitations on taxes and revenues would in large part determine how the policy takes shape.Below,we
outline some ofthe decisions lawmakers face inimposing amansion tax.
i
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Choosing the Right Threshold
States may opt for percent tax thresholds instead of dollar-amount thresholds.As our analysis shows,
taxing properties that fall into the top 1 or 2 percent of the housing price distribution could generate
more revenue for states,but not without consequences.Though this approach is flexible,allowing for
adjustment to changing market conditions,it would require jurisdictions and people involved in real
estate transactions to understand and keep up with frequently changing dollar thresholds.A percent
threshold would need to be based on an earlier year's dollar amount so as not to retroactively impose a
new tax on homeowners.This approach also raises equity issues,to the extent that homes are assessed
at a different percentage of market value.
Determining Which Property Types to Include
Our analysis considers a mansion tax on residential properties only.However,states may decide that
certain residential properties,such as vacation homes or second homes,should be taxed at higher rates.
To increase revenue,states could also lower the eligibility threshold for second homes.Or they could tax
only the owners of second homes,as Rhode Island tried to do.
States may tax commercial properties in addition to residential properties.For example,New
Jersey includes commercial properties in its luxury home tax.Of course,the inclusion of commercial
properties poses additional challenges for businesses and corporate entities,and each jurisdiction
would require a separate analysis.Our analysis excluded luxury apartment buildings because of the
impacts such a tax could have on overall rents.Taxing multifamily and commercial buildings would have
other complexities not included in this analysis.Each state must consider all these factors carefully,
based on expected revenues and legislative restrictions.For example,California law currently requires
that all properties be taxed at the same rate.
Assessing Property Values at Market Rates
Implementing propertytax surcharges can be complicated because of the difficulty of assessing home
values accurately overtime.Real estate is traded less frequentlythan other commodities,and each
property is unique.Though home values are assessed periodically,the market value of a house is
determined only at the point of sale,when an appraisal orvaluation is done.Tax assessment values are
known to be underestimated,and many state regulations,including California Proposition 13,restrict
the growth of tax-assessed values.The underestimation of assessed values is meant to protect residents
from large payment fluctuations caused by changes in their property taxes.But it limits a state or
�EXPLO�RINC� 71H�VIS}�B`ILIIT�Y"OFMAN�S10N�'iTAX.APP'ROACH'ES.
locality's ability to generate revenue from a mansion tax.Moreover,valuation methods,data,and
practices vary widely and are often disputed,which may raise questions about the validity of taxes on
|uxuryhomes.
Potential Impact pnthe Real Estate Market
Estimatingthe potential impact of a mansion tax on the real estate market is important.But sofar,the
evidence has been mixed and the scope ofresearch limited.Kopczuk and Munroe(2015)found that
mansion taxes in New York and NewJersey incentivized buyers and sellers to transact below the$1
million cutoff.They also found that mansion taxes affected transactions above the threshold;listed
prices fell and discounts increased permanently above the threshold.However,the study did not show
whether imposing a mansion tax causes negative spillover effects on transactions belowthe threshold.
In contrast,Slemrod,Weber,and Shan(2017)found that real estate transfer taxes in DC had an
insignificant effect on how often houses were bought and sold.In 2006,DC increased its effective tax
rate from 2.2 to 2.9 percent for houses sold for at least$400,000.As in Kopczuk and Munroe,the DC
study found that after the tax was implemented,fewer houses were sold at or above the$400,000
threshold,and more houses were sold just below the threshold.Though the prices of some transactions
were adjusted lower,sellers did not alter the timing of house sales in response to the tax changes.In
fact,total transaction volume did not appear to be aff ected by the new tax;the trading patterns of
buyers and sellers affected by the taxwere similarto those who were not aff ected.
Using data from Ireland,Hargaden(2017)demonstrated that the impact of a real estate transfertax
differed across the population,depenclingon how the policywas designed.Ireland's transfer tax targets
first'timebuyersandeKedive|ydiscouragedthemfrombiddingabovethmthresho|d.whi|e
incentivizi ng other buyers to bid up the price.
These three studies suggest that a real estate transfertax can change the behavior of real estate
buyers and sellers who are directly affected by the tax.Thus,policyrnakers must be thoughtful about
howthey design and implement a mansion tax.However,though such a tax could marginally impact
transactions in the high end of the real estate market,it is unlikely to have a noticeable impact on other
housing transactions because buyers of high-priced luxury real estate have preferences very different
from those ofother homebuyers.
Conclusion
In this report,we estimated the state and local revenue that could be generated through a mansion
tax—either areal estate transfer tax or a property tax surcharge on luxury homes.Zooming in on a
select group of states,we experimented with different price thresholds and calculated how potential
revenue would differ across states based on those thresholds.
Every housing market is different.Jurisdictions must consider not only how much revenue a
mansion tax could generate,but also how such a tax would interact with existing taxes and statutes and
how it would affect residents.Despite these challenges,many believe mansion taxes are worth
exploring.
But they remain controversial.Before proposing a mansion tax,policymakers should decide how
additional revenues will be used,or what social programs would benefit.Laying out these specifics may
make the tax more politically palatable than simply proposingto use the revenue to fill a budget deficit.
And in states with rapidly rising home prices and rents,allocatingthe revenues to a particular initiative,
such as affordable housing for lower-income residents,could help garner support for a mansion tax.
EXPLtJR1NG SHE 1%IAB)LITY O`F MA�*I'S(C?NiTX APPRUA.CIiES "` �1„
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Property Tax Analysis
Thetables in this section present revenues generated from property tax surcharges for all thestates
studied.Ouranalysis of NewYork,la high-price city,found that the threshold forthe top 1 percent of
homesvvas$17million,and thethreshu|dforthetop2percentwus$12mi||inn,vvith45.438and
9O.9O7eligible properties respectively.
In Massachusetts,the top 1 percent threshold was$1.9 million,and the top 2 percent threshold was
$1.4 million.But the number of eligible properties in thesetwo groups was significantly smallerthan in
New York—18.467and 36.94Sproperties respectively.
In the District of Columbia,the top 1 percent threshold was$2.2 million,and the top 2 percent
threshold was$1.8 million—similar to the thresholds in California and Colorado.But DCismuch smaller
than those states,with only 1,475 eligible properties in the top 1 percent and 2,949 in the top 2 percent.
The thresholds in Maine,Michigan,and Nevada were smaller than those in the other states.Maine's
high-end housing market is dominated by vacation homes.Mai ne has a top 1 percent threshold of
$947.481and atop 2percent threshold of$6Y6.262`with fewer eligible properties(4,954and 9,907
respectively)than Michigan. Nevada's top 1($85O'049)and top 2percent ($6t4'581)thresholds fell
between those ofMaine and Michigan.
� 12
TABLE A..1
California
Total residential properties 8,284,512
Total value $3,127,563,928,268
Case 1
Top 1%threshold $2,086,019
Top 2%threshold $1,531,395
Total homes in top 1% 82,846
Total homes in top 2% 165,691
Total market value of homes in top 1% $308,451,727,216
Total market value of homes in top 2% $454,451,566,272
Propertytax revenue $7,629,032,935
Population(2016) 39,250,017
Propertytax revenue percapita $194.37
Case 2
Total homes>_$5 million 11,597
Total homes>_$2 million 90,601
Total market value of homes>_$5 million $100,903,637,989
Total market value of homes>_$2 million $324,292,304,755
Propertytax revenue $4,251,959,427
Population(2016) 39,250,017
Propertytax revenue percapita $108.33
Notes:Case 1 is a 1 percent tax rate for the top 2 percent of homes and a 2 percent tax rate for the top 1 percent of homes.Case 2
is a 1 percent tax rate for homes worth$2 million or more and a 2 percent tax rate for homes worth$5 million or more.
TABLE A.2
Colorado
Total residential properties 1,683,139
Total value $537,154,597,839
Case 1
Top 1%threshold $2,023,744
Top 2%threshold $1,187,198
Total homes in top 1% 16,835
Total homes in top 2% 33,664
Total market value of homes in top 1% $70,219,070,264
Total market value of homes in top 2% $95,438,289,636
Propertytax revenue $1,656,573,599
Population(2016) 5,540,545
Propertytax revenue percapita $298,99
Case 2
Total homes>_$5 million 3,820
Total homes>_$2 million 17,142
Total market value of homes?$5 million $31,487,463,543
Total market value of homes>_$2 million $70,836,656,470
Propertytax revenue $1,023,241,200
Population(2016) 5,540,545
Property tax revenue per capita $184.68
Notes:Case 1 is a 1 percent tax rate for the top 2 percent of homes and a 2 percent tax rate for the top 1 percent of homes.Case 2
is a 1 percent tax rate for homes worth$2 million or more and a 2 percent tax rate for homes worth$5 million or more.
APPENIDiJC
7P,BIJEA.8
District ofColumbia
Total residential properties 147,448
Total value $81,064,225,911
Case
Top 1%threshold $2.230.999
Top 2%threshold $1'761,049
Total homes intop 1% 1.475
Total homes intop 2Y6 2.949
Total market value ofhomes intop 1Y6 $5.115.648'296
Total market value ofhomes intop 2y6 $7,997.378.I26
P,opedYtaxeveuue $131.130.264
Population(2016) 681.170
Pmpertytaxrevenue percapita $192.51
Case
Total homes/$5million 163
Total homes�:$3mU|ion 2.004
Total market value ofhomes 2:$5million $1,201.449.080
Total market value ofhomes�:$2million $6.232.177,136
Property tax revenue $74.336.262
Population(2016) 681.170
Propertytax revenue percapita $109.13
Notes:Case IisaIpercent tax,ntetnrthe/uv2pencntnrhomes and a2penenttxx,au,uxmemp1penemmhomes.Case
is a I percenttax ratefor homes worth$2 million ormore and a 2 percent tax ratefor homes worth$5 millionor more.
TABLE&4
Maine
Total residential properties 495,320
Total value $96,449,768,420
Case
Top IY6threshold $947,481
Top 2Y6threshold $696.202
Total homes intop 1Y6 4.954
Total homes intop 2Y6 9.907
Total market value nfhomes intop 1% $7.867'985,225
Total market value ofhomes intop 2% $11,834.395.075
Prope dvtax revenue $197'023.803
Population(2016) 1.331,479
Property tax revenue per capita $14797
Case
Total homes?�$5million 57
Total homes 2:$2million 873
Total market value nfhomes�!$5million $341.127.100
Total market value nfhomes 2:$2million $2,599`403,771
PmpedYtaxmvenue $29/05.309
Population(2016) 1'331,479
Propertytax revenuepercapita $22.08
Notes:Case 1isa1percemtax,ateforthe top zrercemorhomes and a2»crczn/taxratefo,me,up1percrntnxhomes.Case n
|sa1percen,taxraoeforhomes worth$umillion o,mo,cand a2vcrcnmtax,atrrorhomes worth$smi||ionormvrc.
i
I
x
TABLEA.5
Massachusetts
i
Total residential properties 1,846,552
Total value $753,680,579,051
Case 1
Top 1%threshold $1,859,900
Top 2%threshold $1,402,000
Total homes in top 1% 18,467
Total homes in top 2% 36,945
Total market value of homes in top 1% $56,314,148,212
Total market value of homes in top 2% $85,815,374,224
Propertytax revenue $1,421,295,224
Population(2016) 6,811,779
Propertytax revenue percapita $208,65
Case 2
Total homes>_$5 million 1,456
Total homes>_$2 million 15,320
Total market value of homes>_$5 million $11,614,221,481
Total market value of homes?$2 million $50,243,651,989
Propertytax revenue $618,578,735
Population(2016) 6,811,779
Propertytax revenue per capita $90.81
Notes:Case 1 is a 1 percent tax ratefor the top 2 percent of homes and a 2 percent tax rate for the top 1 percent of homes.Case 2
is a 1 percent tax ratefor homes worth$2 million or more and a 2 percent tax ratefor homes worth$5 million or more.
TABLE A.6
Michigan
Total residential properties 3,939,491
Total value $462,502,805,491
Case 1
Top 1%threshold $711,200
Top 2%threshold $548,200
Total homes in top 1% 33,784
Total homes in top 2% 67,545
Total market value of homes in top 1% $38,373,046,012
Total market value of homes in top 2% $59,193,000,000
Propertytax revenue $975,660,460
Population(2016) 9,928,300
Propertytax revenue per capita $98,27
Case 2
Total homes 2!$5 million 94
Total homes>_$2 million 2,235
Total market value of homes>_$5 million $550,410,544
Total market value of homes>_$2 million $6,416,790,484
Propertytax revenue $69,672,010
Population(2016) 9,928,300
Property tax revenue per capita $7,02
Notes:Case 1 is a 1 percent tax ratefor the top 2 percent of homes and a 2 percent tax rate for the top 1 percent of homes.Case 2
is a 1 percent tax ratefor homes worth$2 million or more and a 2 percent tax ratefor homes worth$5 million or more.
APPENDIX15�:.
TA[3UA7
Nevada
Total residential properties 973,380
Total value $186,209,268,546
Case
Top 1%threshold $850D49
Top 2%threshold $614,581
Total homes intop 1y6 9.734
Total homes intop 3Y6 19,468
Total market value ofhomes intop 1% $15.919'597'394
Total market value ofhomes intop 2% $22.834.011.849
Pmvrrtytaxrevenue $387.536,092
Population(2016) 2.940,058
Property tax revenue per capita $131.81
Case
Total homes�$5million 222
Total homes?�$2million 1.756
Total market value ufhomes�t$5million $2'076.312.469
Total market value ofhomes�$2million $6.372.0/4.103
Property tax revenue $84,483.866
Population(2016) 2.940.058
Propertytax revenue percapita $2874
Notes:Case 1isaIpercent tax rate for the top 2percent ofhomes and aopercent tax rate for the top xpercent orhomes.Case
is a I percent tax rate f or homes worth$2 mi I lion or more and a 2 percent tax rate for homes worth$5 million or more.
TABLE A.8
New York
Total residential properties 4,543,196
Total value $1,293,807,164,443
Case
Top 1Y6threshold $1,720,000
Top 2Y6threshold $1.210,000
Total homes intop 1% 45.438
Total homes intop 20 90.907
Total market value ofhomes intop 1Y6 $146.906.341.242
Total market value ofhomes intop 2Y6 $211'048.847.739
Pmpertytaxmvenue $3.579.551,889
Population(2016) 19,745.289
Pmpertytaxrevenue percapita $181.29
Case
Total homes 2:$5million 3.644
Total homes�!$2million 34,223
Total market value nfhomes 2:$5million $36.207.513.221
Total market value oYhomes�t$2million $126.148.233`730
Property tax revenue $1.623.557,470
Population(2016) 19.745.289
Pnvpertytaxrevenue perm it $82.23
Notes:Case 1isa1percent tax,atcfo,/xeton2reoen,mhomes and a2penonttxxou,fn,metov1pcnrmo|homes.Case o
is a 1 percenttax ratefor homes worth$2 million ormore and a 2 percenttax ratefor homes worth$5 million or more.
ARRENDIX
Transfer Tax Analysis
The tables in this section present revenues generated from transfer taxes for all the states studied.In
each state,the total sales counts and tax eligibility thresholds were similar for 2015 and 2016.
TABLE A.9
California
2015 2016
Total properties sold 509,515 506,294
Case 1
Top 1%threshold $2,920,000 $2,825,000
Top 2%threshold $2,165,000 $2,100,000
Total homes in top 1% 5,102 5,081
Total homes in top 2% 10,202 10,296
Total market value of homes in top 1% $26,057,771,741 $24,770,457,857
Total market value of homes in top 2% $38,738,578,942 $37,287,865,104
Transfer tax revenue $647,963,507 $620,583,230
Population 39,144,818 39,250,017
Transfer tax revenue per capita $16.55 $15.81
Case 2
Total homes 2_$5 million 1439 1258
Total homes 2_$2 million 11691 11065
Total market value of homes>$5 million $12,664,007,971 $11,138,400,056
Total market value of homes 2_$2 million $41,845,308,392 $38,866,270,307
Transfer tax revenue $545,093,164 $500,046,704
Population 39,144,818 39,250,017
Transfer tax revenue per capita $13.93 $12.74
Notes:Case 1 is a 1 percent tax rate for the top 2 percent of homes and a 2 percent tax rate for the top 1 percent of homes.Case 2
is a 1 percent tax rate for homes worth$2 million or more and a 2 percent tax rate for homes worth$5 million or more.
A 'P'� 'D(X ,t,
TABLEA.10
Colorado
2015 2016
Total properties sold 135,699 132,936
Case
Top 1%threshold $1.388'530 $1,434,790
Top 2%threshold $1804032 $1,089.180
Total homes intop 1Y6 1.357 1.330
Total homes intop 20 2.714 2,659
Total market value ofhomes intop 1% $3'613.819p80 $3'309'761.785
Total market value ofhomes intop 2% $5'211.907,I75 $4.939.195.089
Transfer tax revenue $88.257,863 $82/489'549
Population 5.456.574 5.540.545
Transfer tax revenue per capita $1617 $14.89
Case
Total homes 2:$5million 117 88
Total homes?�$2million 546 559
Total marketva|ueofhomes 2:$5million $999.4/7'167 $687.867.796
Total ma,krtva|ueofhomes?�$2million $2.285,035.593 $2.023.763.860
Transfer tax revenue $32.845.128 $27,116.317
Population 5.456.574 5.540.545
Transfer tax revenueper capita $602 $489
mouascasezisazpcnrmtax,ateoo,motop2penentvrxmne,anua2percent tax rate for the top 1penentm[hnm,s.casez
isaIpercent tax rate for homes worth$2 million or more and a 2percenttax rate for homes worth$5 millionormore.
lABLE 4,I1
DiytrictofCo|umb|u
2015 2010
.~^..~.~`.^.^~~~.. ..'-_ 11,137
Case
Top 1%threshold $2.380000 $2,450,000
Top 2%threshold $1.900.000 $1.900,000
Total homes intop 176 104 113
Total homes iotop 2% 204 226
Total market value ofhomes intop 1Y6 $333.037.342 $390'173,010
Total market value ofhomes intop 2% $540.249.772 $629.969'767
Transfer tax revenue $8.732.871 $10.201.428
Population 672.228 681.170
Transfer tax revenue per capita $12.99 $14.98
Case
Total homes?$5million 0 10
Total homes�:$2million 175 187
Total market value ofhomes 2:$5million $40'717.500 $71.097.030
Total market value ofhomes c$2million $484.280.752 $554`003.218
Transfer tax revenue $5.249.983 $6.251/002
Population 072'228 681.170
Transfer tax revenueper capita $781 $918
Notes:Case 1 is a 1 percent tax rate for the top 2 percent of homes and a 2 percent tax rate for the top 1 percent of homes.Case 2
is a 1 percent tax rate for homes worth$2 million or more and a 2 percent tax rate for homes worth$5 million or more.
i
i3
I
I
TABLEA.12
Massachusetts
2015 2016
Total properties sold 97,137 102,365
Case 1
Top 1%threshold $2,103,520 $2,100,000
Top 2%threshold $1,559,928 $1,560,000
Total homes in top 1% 972 1,033
Total homes in top 2/ 1,943 2,049
Total market value of homes in top 1% $3,312,499,279 $3,514,912,649
Total market value of homes in top 2% $5,047,965,777 $5,327,210,657
Transfer tax revenue $83,604,651 $88,421,233
Population 6,794,422 6,811,779
Transfer tax revenue per capita $12.30 $12.98
Case 2
Total homes>_$5 million 95 97
Total homes>_$2 million 1078 1099
Total market value of homes>_$5 million $758,288,737 $775,299,046
Total market value of homes>$2 million $3,531,472,848 $3,650,101,819
Transfer tax revenue $42,897,616 $44,254,009
Population 6,794,422 6,811,779
Transfer tax revenue per ca pita $6.31 $6.50
Notes:Case 1 is a 1 percent tax rate for the top 2 percent of homes and a 2 percent tax rate for the top 1 percent of homes.Case 2
is a 1 percent tax rate for homes worth$2 million or more and a 2 percent tax rate for homes worth$5 million or more.
TABLE A.13
Michigan
2015 2016
Total properties sold 179,802 179,303
Case 1
Top 1%threshold $642,500 $639,900
Top 2%threshold $500,000 $510,494
Total homes in top 1% 1,800 1,795
Total homes in top 2% 3,677 3,587
Total market value of homes in top 1% $1,587,937,148 $1,565,587,477
Total market value of homes in top 2% $2,638,119,419 $2,580,073,943
Transfer tax revenue $42,260,566 $41,456,614
Population 9,922,576 9,928,300
Transfer tax revenue per ca pita $4.26 $4.18
Case 2
Total homes>_$5 million 0 0
Total homes>_$2 million 30 31
Total market value of homes>_$5 million $0 $0
Total market value of homes>_$2 million $78,126,544 $77,157,820
Transfer tax revenue $781,265 $771,578
Population 9,922,576 9,928,300
Transfer tax revenue per capita $0.08 $0.08
Notes:Case 1 is a 1 percent tax rate for the top 2 percent of homes and a 2 percent tax rate for the top 1 percent of homes.Case 2
is a 1 percent tax rate for homes worth$2 million or more and a 2 percent tax rate for homes worth$5 million or more.
'
TABLE-A-14
Nevada
2015 2016
Total properties sold 76,083 78,447
Case
Top 1%threshold $18.411.869,350 $19.942,154.519
Top 2%threshold $1p53.008 $1.021.569
Total homes intop 1% 752'180 750.000
Total homes intop 2% 764 785
Total market value ofhomes intop 1Y6 1.522 1.597
Total market value nfhomes intop 2Y6 $1.384,044.090 $1.422.640.290
Transfer tax revenue $34.258.142 $35'450'576
Population 2.890.845 2.940.058
Transfer tax revenue per capita $11.85 $12{)6
Case
Total homny?!$5million 19 20
Total homes?:$2million 200 196
Total market value ofhomes a$5million $122.340.000 $138.850.000
Total market value ofhomes�:$2million $600`009.925 $630,424.297
Transfer tax revenue $7.223/499 $7.692'743
Population 2.890,845 2.940.058
Transfer tax revenue per capita $250 $262
Notes:Case zisazpercent tax rate for the top 2percent mhomes and a 2percent tax rate for the top Ipercent m[homes.Case n
isazpercent tax rate for homes worth$2 mi Ilion or more and a 2 percent tax rate for homes worth$5 million or more.
-ABLEA.l5
Washington
2015 2010
Total properties sold 148,214 156,384
Case
Top 1%threshold $1.565.000 $1.662.500
Top 2%threshold $1.175.000 $1.260'000
Total homes intop 1% 1`484 1'566
Total homes intop 2% 2.975 3.144
Total market value ufhomes intop lY6 $3.480.757,775 $3.800.775.685
Total market value ofhomes intop 296 $5.465,020,294 $6.053.267.414
Transfer tax revenue $89/457'781 $98.640'430
Population 7.170,351 7'288.000
Transfer tax revenue per capita $12.48 $13.52
Case
Total homes�!$5million 51 50
Total homes 2:$2million 681 ROO
Total markdva|uenfhomes?:$5million $342.854.000 $334'551,957
Total market value ofhomes?:$2million $2.054.392.071 $2.411.126.967
Transfer tax revenue $23'972/461 $27,456.789
Population 7.170,351 7'288.000
Transfer tax revenue percapita $334 $377
Notes:Case ziso1percent tax ratefor the top 2 percentof homes and a 2 percenttax rate for the top 1 percent of homes.Case 2
is a I percent tax rate for homes worth$2 million or more and a 2 percent tax rate for homes worth$5 million or more.
I
i
i
s
3
Notes
1 These states are Alabama,Arkansas,California,Colorado,Connecticut,Delaware,Florida,Georgia,Hawaii,
Illinois,Iowa,Kansas,Kentucky,Maine,Maryland,Massachusetts,Michigan,Minnesota,Nebraska,Nevada,New
Hampshire,New Jersey,New York,North Carolina,Ohio,Oklahoma,Pennsylvania,Rhode Island,South
Carolina,South Dakota,Tennessee,Virginia,Washington,West Virginia,and Wisconsin.Arizona imposes a tax of
$2 per deed or contract.
Z Carl Campanile,"'Mansion Tax'Produces Geyser of Revenue for New York,"New York Post,March 20,2014,
https://nypost.com/2014/03/20/ma ns io n-tax-prod uces-geyser-of-reve nue-for-new-yo r k/.
3 Jeff Mays and Amy Zimmer,"De Blasio Proposes`Mansion Tax'on Homes That Sell for$2M or More,"DNAinfo,
January 30,2017,https://www.dnainfo.com/new-york/20170130/upper-east-side/de-blasio-mansion-
mansion-tax-millionaire/.
4 Ian Donnis,"Speaker Mattiello Wants to Eliminate the'Taylor Swift Tax,'"RlPR,April 23,2015,
http://ripr.org/post/speaker-mattiello-wants-eliminate-taylor-swift-tax;Katherine Gregg,"Raimondo's Second-
Home Tax Targets Properties Worth More Than$1M,"Providence Journal,March 18,2015,
http://www.providencejournal.com/article/20150317/NEWS/150319308;and Ted Nesi,"Raimondo Drops
'Taylor Swift Tax'Proposal,"WPRI,May 11,2015,http://www.wpri.com/news/raimondo-drops-proposal-for-
taylor-swift-tax/1044008221.
5 In the 2016 American Community Survey,California had a population of 39,250,017 and New York 19,754,289.
b We excluded cooperatives from our analysis of New York,though they make up a large percentage of the
housing stock.Under New York law,property taxes are assessed for the entire co-op and then distributed
proportionally to each unit within the co-op.It was difficult to identifywhich properties within a given co-op
could be classified as a luxury home.As an exploratory analysis,we added the total value of co-ops,assuming the
price distribution was the same as the rest of the residential market,and calculated the revenue generated.We
did not include this analysis in the paper for simplicity.
�����^�����
13
�� N �� � 0 ����
HarDaden.End aPatrick.2017."The Direct and Spillover Effects ofTaxation:Evidence from aProperty Tax Break
for First-Time Buyers.''Working paper.
Kopczuk,Wojciech,and David Munroe.2015."Mansion Tax:The Effect of Transfer Taxes on the Residential Real
Estate Markeg.^American Economic Journal:Economic Policy 7(2):214-57.
McGuire,Therese J,,and Kim S.Rueben.2006.The Colorado Revenue Limit:The Economic Effectsof TABOR.
Washington,DC:Economic Policy Institute.
5|emmd.Joel,Caroline Weber,and Hui Shan.2017."The Behavioral Response toHousing Transfer Taxes:Evidence
from aNotched Change inDl.Po|ic«^Journal ofUrban Economics 1O8:137-53.dui:1O.1U16/jjue201785IN5.
Young,Cristobal,Charles Varner,Ithai Z.Lurie,and Richard Prisinzano.2016."Millionaire Migration and Taxation
of the Elite:Evidencef rom Administrative Data."American Sociological Review8l(3):421-46,
doi:10.1177/0003122416639625.
AbOLI-ttheAuthors
Jung Hyun Choi is a research associate with the Housing Finance Policy Center at the Urban Institute.
She studies urban inequality,focusing on housing,urban economics,real estate finance,and
disadvantaged populations in the housing market.Beforejoining Urban,Choi was a postdoctoral
scholar at the University of Southern California Price Center for Social Innovation,where her research
examined innovative housing and social policies to enhance quality of life for low-income households.
Choi holds a PhD in public policy and management from the Price School of Public Policy at the
University of Southern California.
Bhargavi Ganesh is a research analyst in the Housing Finance Policy Center.Before joining Urban,she
interned in finance and worked on research,underwriting,and surveillance of housing finance
investments.She received a BA with honors in economics and a minor in math and environmental
studies from New York University.While there,Ganesh was a staff writer and online codirector for
news and policy-related student publications.For her senior thesis,she received an undergraduate
research grant to study catastrophe risk perception and flood insurance reform along the East Coast.
Sarah Strochak is a research assistant in the Housing Finance Policy Center.She works with
researchers to analyze data,write blog posts,and produce data visualizations for the center's work on
access to credit,homeownership,and affordable housing.Strochak received a BA with honors in
economics from the University of California,Berkeley,with minors in city and regional planning and
geospatial information science and technology.While at Berkeley,she was a student fellow for the
University of California Carbon Neutrality Initiative and a research assistant at the Terner Center for
Housing Innovation.For her senior honors thesis,she developed a methodology for analyzing
mandatory foreclosure mediation laws.
Bing Bai is a research associate with the Housing Finance Policy Center,where he helps build,manage,
and explore data to analyze housingfinance trends and related policy issues.Formerly an economic
modelingsenior at Freddie Mac,Bai conducted research on housing and mortgage markets and
developed models to evaluate foreclosure alternatives for nonperforming mortgage loans.He holds a
PhD in economics from Clemson University.
ABOJ� THIEA_U�IfO`RS'. 2 .
STA7 IFN-CENTOF |�DEPENDENCE
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