Hiking Tax For NJ ‘Mega-Mansion’ Sales Could Raise Serious Cash: Study

NEW JERSEY — It’s no big secret that it’s expensive to live in New Jersey, whether you own or rent a home. So maybe it’s time to ask the wealthiest households to chip in a little bit more when they sell a “mega-mansion” – in the name of the greater good, an expert argues.

A “modest” increase in the fee on home sales over $1 million (from the current rate of 1 percent to 4 percent) would generate $616 million in revenue for the state, according to a new study from Peter Chen, a senior policy analyst with nonprofit advocacy group New Jersey Policy Perspective (NJPP).

Chen said only a “small fraction of the wealthiest households” would pay the proposed fee: fewer than 10 percent of homes in the state are sold for more than $1 million, and only 2 percent exceed $2 million.

Levying a 4 percent tax on home sales over $2 million would affect only the top 2 percent of sales, while raising over $200 million in annual revenue for the state. Extending this same tax to homes sold over $1 million could generate hundreds of millions of dollars more for the state, according to the analysis.

Would a tax hike harm home sales for the luxury market in New Jersey? Not likely, Chen argued: New Jersey’s existing 1 percent assessment on properties sold for over $1 million has not dampened the luxury home market. In fact, luxury home sales increased in 2023, even as overall sales declined, he pointed out.

Meanwhile, the extra money could be put to good use paying for programs that boost working-class families, such as affordable housing initiatives, rental and mortgage assistance, and tax credits like the Child Tax Credit and Earned Income Tax Credit.

“A higher fee when buying and selling mega-mansions would help pay for affordability programs for the rest of the state,” Chen said.

“As housing affordability puts basic living costs out of reach for so many residents, calling on the wealthiest homeowners to pay a higher rate would make the tax system more equitable and help fund affordable housing and other critical infrastructure,” he argued.

Read the full study here.

Apparently, Chen’s analysis struck a nerve with some New Jersey homeowners and pundits, who argued that $1 million isn’t likely to buy you a “mega-mansion” in the state.

“$1 million is a small ranch now,” one person said. “$1 million doesn’t get you ‘luxury’ in New Jersey,” another quipped.

“Because those houses don't pay enough in property taxes already,” another commenter wrote.

Chen defended his analysis, responding that a lot of people may be mad at the idea that a $1 million home is “high-end” in New Jersey – but it decidedly is.

“Many high-income or high-wealth residents don’t ‘feel’ rich,” he replied, offering the examples of driving a Hyundai or shopping at Target. But the median household income in New Jersey is $96,000, he argued. And the 90th percentile household income is $270,000.

“Just because you don’t feel rich, doesn’t mean you aren’t,” Chen said.

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