Wealth Concentration Near ‘Levels Seen During Roaring Twenties’… The $238 Million Penthouse Provokes Fierce Response: Tax It

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Wealth concentration near ‘levels last seen during the Roaring Twenties,’ study finds

The shift is eroding security from families in the lower and middle classes, who rely on their small stores to finance retirement and to smooth over shocks like the loss of a job. And it’s consolidating power in the hands of billionaires, who are increasingly using their riches to purchase political influence.

The 400 richest Americans – the top 0.00025 percent of the population – have tripled their share of the nation’s wealth since the early 1980s, according to a new working paper on wealth inequality by University of California at Berkeley economist Gabriel Zucman.

Those 400 Americans own more of the country’s riches than the 150 million adults in the bottom 60 percent of the wealth distribution, who saw their share of the nation’s wealth fall from 5.7 percent in 1987 to 2.1 percent in 2014, according to the World Inequality Database maintained by Zucman and others.

Overall, Zucman finds that “U.S. wealth concentration seems to have returned to levels last seen during the Roaring Twenties.” That shift is eroding security from families in the lower and middle classes, who rely on their small stores of wealth to finance their retirement and to smooth over economic shocks like the loss of a job. And it’s consolidating power in the hands of the nation’s billionaires, who are increasingly using their riches to purchase political influence.

Zucman, who advised Sen. Elizabeth Warren, D-Mass., on a recent proposal to tax high levels of wealth, warns that these numbers may actually understate the amount of wealth concentrated in the hands of the rich: It has become more difficult to account for the true wealth of the ultra-rich in recent decades, in part because many hide their assets in offshore tax shelters.

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For the last five years, a bill that would create a so-called pied-à-terre tax in New York has languished in the State Legislature, where proposals for new taxes often go to die.

But after Kenneth C. Griffin, a hedge fund billionaire with an estimated net worth of $10 billion, added to his personal real estate portfolio last month by closing on a $238 million apartment on Central Park South, things may soon be different.

The record purchase — surpassing the cost of the next most expensive home in the United States by more than $100 million — was a stark reminder that when wealthy buyers like Mr. Griffin purchase expensive apartments as second homes or investments, New York City and the state get less financial benefits. If the buyers live out of state, they are not subject to state or city income taxes, and do not pay New York sales tax while outside the state.

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A pied-à-terre tax would institute a yearly tax on homes worth $5 million or more, and would apply to homes that do not serve as the buyer’s primary residence.

Large cities around the world have been grappling with how to make wealthy absentee property owners pay for the privilege of owning secondary residences, a recent report from the Real Estate Institute of British Columbia shows. Sydney, Paris and London have all recently added or increased taxes on the purchase of secondary homes.

In Hong Kong, nonpermanent residents pay a 15 percent fee on the value of the home, and foreigners pay an additional 15 percent fee. Singapore has restrictions on the purchase of residential property by foreigners and a 15 percent tax. In Denmark, foreigners are required to obtain permission from the government to purchase secondary homes.

In Vancouver, where the greatest concentration of vacant properties is downtown, owners of empty residential properties are charged a 1 percent tax based on the assessed value.

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