The Republicans' proposed tax reform bill is expected any day now. The bad news: It would have a “decidedly negative” impact on high-end real estate.
According to Housing analyst Christian Drake, the bill would greatly affect the state and local tax (SALT) deduction for high-end homeowners in places like New York City, Westchester County and Connecticut.
“If you distill this whole thing down from a legislative perspective it boils down to: ‘How can we pay for this and who can we take money from?’” Drake says in the above clip from The Macro Show. “It turns out it’s high-income earners in high SALT states where they have high property values.”
So what does this mean for these areas – like Boston, San Francisco and others? According to Drake, it could mean relocation for businesses and residents.
“It definitely has the capacity for some negative self-reinforcing cycle action,” Drake says.
Drake explains: if the SALT reduction is eliminated and those states have some out-migration, which would result in a lower tax base just as benefit, retirement, and pension obligations are ramping, that puts a state in an even more precarious position by forcing them to raise taxes.
“It will probably be a case of concentrated harm and diffuse benefit,” Drake says.
Watch the full video above.
