Formerly owned by real estate swindler Benjamin Sisti and boxing champ Mike Tyson, the 48,000-square-foot Farmington mansion was finally sold by rapper 50 Cent after languishing on and off the market for 12 years. The property sold for $2.9 million. (Douglas Elliman)
A so-called mansion tax applied to property sales over $2.5 million — but avoided if the homeowner maintains Connecticut residency — is being decried by the state’s wealthy population and real estate industry.
The levy, supported by Gov. Ned Lamont and approved by the House and Senate without a single Republican vote, increases the conveyance tax rate from 1.25 percent to 2.25 percent on sales over $2.5 million. So the seller of a $3 million home would pay 0.75 percent conveyance tax on the first $800,000 of the sales price, 1.25 percent on the next $1.7 million and 2.25 percent conveyance tax on the final $500,000 under the new three-tier system.
The tax, which was included as part of the state budget, is separate from a 0.25 percent conveyance tax owed to cities and towns on home sales.
Critics say targeting multimillion-dollar sales is a blow to the already sluggish real estate market, especially in lower Fairfield County and in Lamont’s hometown of Greenwich. They note that a state income tax credit offset for those maintaining Connecticut residency won’t kick in until 2023, three years after the mansion tax goes into effect.
“It basically is an exit tax for people leaving. How smart is that?" said William Raveis Jr., whose name is synonymous with Connecticut real estate. “The market at that level is already depressed.”
“So we’re following our customers,” Raveis said. “At the end of the day, no one is moving into the state of Connecticut because of various taxes. Now they’re attacking housing, as opposed to going after savings and spending. They’ve just got it backwards.”
“Governor Lamont supports the mansion tax, which levies a 2.25 percent penalty when people whose homes are valued over $2.5 million sell their homes and leave the state,” La Luz said. “This is a progressive proposal on which the governor’s administration worked collaboratively with legislative leaders to develop a proposal to move forward. Overall, this biennium reflects his promise of an honestly balanced budget that is passed on time giving local leaders the confidence of knowing what their budgets will look like for the next two years. It closes a $3.7 billion deficit without tax rate increases or significant cuts to essential services and invests in the future through increases to education and workforce development while protecting our most vulnerable communities.”
In 2018, 276 of the approximately 35,504 single-family homes that sold statewide were over $2.5 million, according to Mark Pruner of Berkshire Hathaway HomeServices New England Properties in Greenwich.
The vast majority of single-family home sales over $2.5 million in 2018 in Connecticut, shown on this map, were concentrated in lower Fairfield County. (Mark Pruner of Berkshire Hathaway HomeServices New England Properties/ SmartMLS)
At the same time, Meskers said, wealthier residents were able to avoid a 2 percent surcharge on investment income proposed by his Democratic colleagues for individuals earning more than $500,000 and for joint filers with incomes over $1 million.
In Darien, where the average list price of a home in 2019 is $2.2 million, the mansion tax was panned Tuesday by First Selectman Jayme Stevenson, a Republican.
Haskell said he understands the fiscal restraints and obligations facing budget architects and that they attempted to offset the mansion tax impact with a credit for those maintaining Connecticut residency.
“It’s not from New London County. It’s not from Hartford County,” Raveis said. “The state is transitioning from being basically a senior level management state with a highest income per capita to a state that is going into more of a blue-collar state. Not that there’s anything that’s wrong with it. [But] they’re expunging people with money.”