‘Taylor Swift Tax’ in high-end holiday homes spread to more states

Taylor Swift took part in the 67th Grammy Awards on February 2nd, 2025 in Los Angeles, California.

Frazer Harrison | Getty Images Entertainment | Getty pictures

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A new move by states to tax the real estate of the rich has triggered a counter -reaction among brokers and potential buyers who say that taxes punish the most important local expenses.

From tax increases to expensive second houses in Rhode Island and Montana to Cape Cods, transmission tax for houses over 2 million US dollars and the LA Mansion Tax see the state and local governments in the expensive real estate of the rich.

“It is a slap on the face for people who only spend money here,” said Donna Krueger-Simmons, sales agent at Mott & Chace Sotheby’s International in Watch Hill, Rhode Island.

The tax increases are powered by stricter state budgets and populist trouble over the housing costs. The states would like to compensate for the budget cuts expected by the new tax and expenditure calculation in Washington. At the same time, the real estate market has become a story of two buyers, with the middle class and younger families difficult to afford a houses, thriving by wealthy all-cash buyers during the luxury housing market.

The solution for many states: tax the houses of the rich.

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The new submission of Rhode Island with the nickname “The Taylor Swift Tax” is one of the most extreme. The pop star bought a beach house in the Elite Watch Hill Community of the state in 2013.

The measure leads to a new surcharge for second houses worth more than 1 million US dollars. For non-primary residential buildings or those who are not occupied for more than 182 days a year, the state will charge USD $ 2.50 for every estimated value of $ 500 over the first $ 1 million. This indictment is against existing property taxes and will lead to large increases for luxury houses in Newport, Watch Hill and other well -laid -back summer communities in the state.

According to local real estate records, Swift’s house is rated to around 28 million US dollars. Your current property taxes are estimated at around 201,000 US dollars a year. The new fees will give their annual taxes a further 136,442 US dollars and increase their annual total to 337,442 US dollars -although the locals say that they rarely visit.

Real estate agents say that the increase is aimed at taxpayers who already contribute the most. Wealthy second home owners pay strong property taxes, but do not use many local services because their main residences in New York are. Boston; Palm Beach, Florida; Or other places. Your children usually do not attend local schools and they are only rare users of the police, fire, water and other municipal services, since most of them only remain 10 to 12 weeks a year.

“These are people who simply come here for the summer, spend their money and pay their fair share of taxes,” said Krueger-Simmons. “They are punished just because they live elsewhere.”

Brokers and long -time residents say that the summer residents of Newport, Watch Hill and other seasonal beach cities are the economic engines for local companies, restaurants and hotels.

“They only hurt the people who support small businesses,” said Lori Joyal from the Lila Delman Compass Office in Watch Hill. “They pursue the people who spend most of the money in these cities.”

From October, Rhode Island will also move its transport tax to luxury impodes. The tax of real estate sales is an additional $ 3.75 for every 500 US dollars, which is paid for over 800,000 for a real estate purchase. At the same time, the steep estate tax of the state holds many of the ultra-rich to live there full-time.

Brokers say that some owners sell in the second home and many prospective buyers pause their purchases. While the tax increase alone will not lead to a significant wealth flight, potential buyers in Rhode Island are already considering the coastal cities in Connecticut as alternatives.

“It’s always about decisions,” she said. “At the end of the day it is about how to spend their discretionary dollars. Connecticut has some beautiful coastal cities without some of these other high taxes.”

File – In this May 27, 2013, people pass a house that Taylor Swift heard in the village of Watch Hill in Western, RI,

Dave Collins | AP

Montana has fulfilled a similar tax. The influx of Californians and other wealthy newcomers that flow into the state during the covid has led to rising real estate prices and a growing resentment over gentrification. In the meantime, the low tax rate and the lack of sales tax of the state left little space for increasing sales for the necessary increase in services.

In May, the state passed a two -stage property tax plan, which reduces interest rates for full -time residents and taxes are increased to second houses and short -term rents. The tax rate is 0.76%for primary residences and long -term rents worth or below the state’s middle home price. Houses that are more than the value will be exposed to a level ratio system of up to 1.9% compared to the value of four times the middle price.

The Montana Ministry of Sales expects the changes that will begin next year to increase the second home tax taxes by an average of 68%. Brokers say some buyers are waiting to see the tax invoices next year before making decisions about whether they should buy or sell.

“I heard from some buyers who set up the brakes to wait for the dust to settle to see what is happening,” said Valerie Johnson with Purewest Christie’s International Real Estate in Bozeman, Montana.

Johnson said that taxes were advertised by the legislators as the owner of the wealthy second home owners, but also meet long -standing locals and will rent them for income.

“These are small companies for many people,” she said.

Manish Bhatt, a high -ranking political analyst in the tax foundation, said tax increases that are aimed at wealthy owners from a second home could be politically popular, but they rarely ensure a successful or efficient tax policy. The reform of the property tax should be widespread instead of concentrating on taxpayers who are picked up just because they do not live in a community full -time, he said.

“There are income at the moment,” he said. “But the taxation of the second home could have the opposite effect-to keep people from having a second home or still having in these communities.”

While the new taxes alone may not drive away the rich, “we know that taxes are important for companies and individuals and that people could cause people to make a decision to buy in another nearby state,” said BHATT.

The forecast income from the new taxes can also disappoint. When Los Angeles adopted his so-called “manor house tax” in 2022, the advocates observed revenue projections between $ 600 million and $ 1.1 billion a year. According to the Los Angeles Housing Department, the tax, which was imposed in real estate sales over 5 million US dollars, has only collected $ 785 million after more than two years.

Experts say higher interest rates that harm the real estate market have played a role. But Michael Manville, Professor of Urban Planning at the UCLA Luskin School of Public Affairs, said that wealthy buyers and sellers also reduced the transactions to response to the wheel.

“The lower income is one reason to be affected because it indicates that the tax may reduce the transactions, which in turn can reduce production and property tax revenue for the property,” he said.