00:00Greg, good to have you on the program. This is a most read story on the Bloomberg terminal and for
00:04very good reason. It's not just the headline. That is amazing. The entire story is amazing. Taylor Swift tax stirs
00:10bad blood with Rhode Island homeowners. What is the so-called Taylor Swift tax?
00:16So the tax is an annual property tax on second homes in Rhode Island that are valued over $1 million.
00:24It's half a percentage point. And it was passed last year as part of the state budget. The purpose is
00:29to raise money to build more affordable housing in Rhode Island.
00:32It seems like a relatively small amount. And the reason I bring that up is just for the Taylor Swift
00:38example. She has a 12,700 square foot mansion. It's assessed at $28 million. So that means an extra tax
00:48bill of about $136,000. That's not that much for her, given the value of the home. How is it
00:55affecting, though, people at the lower end of the income and fame spectrum?
01:01Yeah, it's interesting. I mean, the loudest protests here are not coming from those who own mega mansions next to
01:07Taylor's and Watch Hill. It's really coming from these homeowners who have had modest properties, modest vacation homes in their
01:15family for generations, often, you know, three or four generations, who are going to be seeing their tax bills going
01:22up by 50% or more with this Taylor Swift tax.
01:26You know, a lot of these homes can't be you can't stay in them or you can't rent them out
01:30during the winter and parts of the spring or the fall because they're not insulated or they don't have heating.
01:36So considering, you know, how if people even if people wanted to rent them out to try to make some
01:42money to make up for this tax, they really have a small window to do so in the summer.
01:46I mean, I just find it being interesting that the loudest protests aren't necessarily coming from the billionaires like Taylor
01:52Swift, but those who have those vacation homes there.
01:55How long has this really been a contentious issue in the area or have we really been seeing this more
02:00highlighted as of late?
02:02Yeah, it's interesting. So the tax was enacted, as I said, as part of the state budget about a year
02:07ago, but it's really only gotten on people's radars in the past few weeks.
02:11The state sent out notices to those who may be subject to the tax in May, sent about 8000 notices.
02:17And as people have arrived to their summer homes on the coast, you know, conversations have started.
02:23It's really only been in the past few weeks that there's been an uproar about this.
02:27And actually now there's a law firm in Providence is organizing a lawsuit for, you know, they're hearing from these
02:35unhappy homeowners who want to challenge this tax in court, saying it's unconstitutional.
02:40So there may be legal action coming in the next few weeks.
02:44Greg, you you make the point in your piece, and it's it's a really important one, that this is not
02:48occurring in a vacuum.
02:49The challenges that it's trying to address have to do with affordable housing that's affecting pretty much every state in
02:56the country right now.
02:57But it's also part of a pattern of of leaders in Democratic states of introducing taxes to try to supplement
03:06affordable housing or try to tax those at the most upper ends of the income spectrum.
03:11So it makes me think of what's happening here in New York with Zohar and Mom Domini pushing through his
03:17second home tax.
03:18We just spoke about Ken Griffin and what he's doing in Miami right now and the buying of basically that
03:25entire building.
03:26We just spoke about that a few minutes ago.
03:28What is this?
03:30What does this signify to you in this moment of time?
03:34There's a lot of voter anger around wealth inequality, around affordability that, you know, that's a maybe the big buzzword
03:42this midterm season is affordability.
03:44So, yes, you are you did see that second home tax also taking effect this week in New York.
03:49You're seeing more and more states looking at millionaire taxes.
03:52Actually, Rhode Island just last month enacted its millionaires tax.
03:57Massachusetts, Maine, Washington state, they all have millionaire taxes.
04:00So, yeah, Democrats, you know, there's their Democratic leaders are saying, look, we're facing a budget crunch.
04:08They're blaming Trump and federal funding cuts in D.C.
04:11And they're looking toward the wealthy to make up some of that gap.
04:16So in this particular instance, it's collecting five dollars for every one thousand dollars that a vacation home's value is
04:23assessed over one million dollars.
04:25Do you expect this model to potentially be used in other regions of the nation?
04:31I think so. I do think this is a bellwether. That's how these taxes have worked.
04:36You saw Massachusetts pass the nation's first millionaire tax in 2022.
04:41More and more. So it's popping up in more and more states the past year or two.
04:44So and there, you know, think of places that are led by Democrats, California, you know, Washington state,
04:52states up and down the East Coast that have lots of vacation homes that are vacation hotspots.
04:57So I could certainly see this spreading to other states in the coming years.
05:01You mentioned the the potential legal challenge that this this could face.
05:06You do note in your piece that the law firm Hinkley Allen and Snyder expects to file a lawsuit on
05:11behalf of homeowners challenging this.
05:14What is their argument going to be?
05:18Well, that's that's that's still under development, but they're they're arguing this this tax violates the federal and state constitution
05:25that they are.
05:27They could claim that it's a nonconstitutional taking what you are.
05:32What I'm hearing from homeowners and I'm not sure the extent to which this will be will make it into
05:38the legal filings.
05:39But again, this argument that, you know, it's not fair, you know, we can't make up this money, even if
05:45we rent out our homes.
05:46We can only rent our homes for a few, you know, a handful of months a year.
05:51It's just not fair that that, you know, we're expected to pay in some cases, you know, upwards of ten
05:57thousand dollars or more in new taxes under under this measure.
06:02So do you expect any sort of exodus?
06:05I mean, I'm also looking at the story about the Providence area, the luxury home sale prices in the area
06:11have increased about six point three percent year over year.
06:14Of course, we know this kind of is due to tight supply and prices going up.
06:18But do you expect some of those deep pocketed buyers to start looking elsewhere or are we getting to the
06:24point where it's like, where else can we go?
06:25Because everyone's pushing them out from certain regions.
06:29Yeah, it's it's fascinating.
06:31You know, I talked to a lot of real estate agents for this story and you're not really seeing any
06:36sort of effect yet.
06:37And they don't they don't expect that you will for at least at least the near term.
06:42I spoke to one agent who pointed to a Texas resident who sails off of the Newport coast and was
06:49in the market for a house, you know, in the 10 million to 20 million dollar range.
06:53And then once this tax passed, decided, yeah, forget about it.
06:57I'll look elsewhere.
06:57But that's really been the exception.
07:00You know, people are really attached to these homes, especially these homeowners whose properties have been in their family for
07:05generations.
07:06So, you know, the tax just went into effect.
07:09They're not feeling the financial pain yet.
07:11I suspect people will be filing for exemptions and maybe seeing how this lawsuit plays out.
07:16So I think we're a bit away before you see anything resembling a meaningful exodus.
07:21It's called the quote, put Taylor Swift tax.
07:24Did has Taylor Swift said anything about this?
07:27She has not.
07:29Yes.
07:29Unlike Ken Griffin, who, you know, has had that very public feud with Momdani over New York's second home tax.
07:36Taylor has not commented on it.
07:38I reached out to her publicist and did not hear back.
07:42So she's maybe she's focused on the wedding, but she's she's staying quiet.
07:45She's looking for some work.
07:45You're like me, I know still.
07:45Yeah.
07:46So you're like, all right, yeah.
07:46Yeah.
07:46I know.
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