The richest of the filthiest rich in one of the world’s richest cities are doing their damndest to figure out how to skip paying what fans and opponents alike are calling the new “mansion tax.”
As the Los Angeles Times reports, last Election Day, voters approved Measure ULA—a documentary transfer tax that increases the city’s cut of the money for land sold within it. Effective April 1, 2023, the rule will impose an additional tax on properties deemed “high value,” with rates rising to four percent on property sales valued between $5 million and $10 million, and 5.5 percent on properties exceeding $10 million in value.
An analysis published by UCLA’s Lewis Center for Regional Policy Studies finds that the tax will affect only about four percent of overall real estate transactions in a given year, including commercial, and less than three percent of single-family home and condo sales, the Times reports, but the lucky few whose obscene fortunes are affected by the tax are feverishly devising plans with their money handlers and other lackeys to avoid paying one red cent of it.
For, not only would the measure fluster a tiny group of homeowners—developers and agents would feel the burn, too.
Others believe that the tax would be a nifty way for super-cush property owners to help fix city problems. These problems, of course, stem from the significant appreciation of their property values, making said properties unaffordable for the average Angeleno. However, if developers were to be exempt from the tax, the madly monied contend, they could still build affordable housing without worrying about the fee. They claim, as such humans are wont to do, that the new tax—like all taxes—could make them averse to pursuing projects that might also benefit the greater good.
“If potential profits go down, landowners might be incentivized to sit on their land instead of developing it or selling it to a developer,” Shane Phillips, House Initiative Project Manager for UCLA’s Lewis Center, tells the Times. “I’m not concerned for the welfare of landowners, but we have to acknowledge the economic reality that these people have choices. And we’ve made the choice to develop less compelling in some cases.”
The measure is making certain homeowners and those adjacent to their wealth get truly creative about keeping all of it right in their pockets. Given that the tax is fixed on sales only above $5 million, the newest, greasiest workaround is to split properties into smaller parcels with different ownership of each. This means owners could (in theory) avoid an $825,000 tax bill on a $15 million property if they were to band together and sell the three parcels for just shy of $5 million each. Thus, they would hypothetically rip off not only the taxman, but also the city in which they live, and from which they derive untold benefit and advantage.
The most obvious scheme, however, is to simply unload property before the mansion tax goes into effect in April. As Compass agent Bret Parsons tells the Times, “For owners who were on the fence about selling, this will speed up the process.”
He added that “rich people are very clever” and “they have time to look for loopholes.”
We’re sure the latter is quite true.
Regardless of the acumen perceived by those who feed on the wealth of the hyper-secure, they want you to believe that the new tax could prove to be destructive given L.A.’s current housing crisis. Though the tax was intended and voted in as a measure to benefit the entire city, the logic goes that the fabulously well-to-do would sooner sink a metropolis than pry open a change purse. And some of them are unabashed in expressing that threat.
Jason Oppenheim of the Oppenheim Group told the Times that the tax is a travesty, as the handmaiden to power predicts sales will skyrocket for the next three months, followed by a market freeze once the tax hits with sellers hanging onto their deteriorating properties like grim death as hapless buyers (also rich as hell) are unable to buy unless—heaven forfend!—they plan to own for multiple decades.
“It’s going to push developers out of L.A.,” Oppenheim warned. “A 4% or 5.5% tax equates to 20-30% of developer profits. So those developers will choose to develop in other luxury communities where they won’t have to pay the tax, such as Beverly Hills, West Hollywood or Newport Beach.”
Well, if that’s the kind of person who’ll be fleeing L.A. when the mansion tax takes effect, it just might be a beautiful spring after all.
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