Economics

Mansion Taxes Could Generate Billions Nationally Each Year

States with existing mansion taxes should increase their rates on the highest-value homes. States without these taxes should enact them, with rates that get progressively higher as the value of the house goes higher. If every state enacted progressive transfer taxes on high-value homes, billions of dollars could be generated for state budgets across the country. Taxing the top 10 percent, 5 percent, and 1 percent of home sales in every state could generate a total of $8.7 billion annually.[23] (See Figure 3.)

To give a state-specific example, consider a hypothetical proposal that adds a progressive marginal tax to sales of the top 10, 5, and 1 percent of homes in Virginia (meaning homes sold at or above $900,000, $1.1 million, and $1.9 million, respectively.) Applying a marginal tax rate of 2 percent, 3 percent, and 4 percent to each of those thresholds would generate an estimated $128 million annually. If this funding were earmarked for the state’s Affordable Housing Trust Fund, which has received just $18 million since fiscal year 2018, it could increase investment in that fund tenfold in just a single year.[24] Further, since a real estate transfer tax would create an ongoing revenue source, it could be used to fund housing initiatives like rental and operating subsidies that are difficult to finance with one-time state investments.

By the article's explanation, the top 10, 5, and 1 percent are not introductory price levels. These are high-value homes, not starter homes.