NYC: Too Rich For its Own Good.


By Benjamin M. Adams on June 14, 2018     @BenAdamsO_O

A few years back, I represented the purchaser of a newly constructed condominium apartment in Chelsea. It was a generous two-bedroom and priced accordingly, at five million dollars. My client took a mortgage of $3.5 million. Most people realize that there are “closing costs” associated with real estate sales. The amount of closing costs varies widely, not merely from state to state, but within a state. So when I sat down with my client at the closing table to complete his $5 million purchase, what do you think he paid in closing costs? Go ahead and venture a guess. You’ll probably be wrong, but that’s part of the fun. Remember that closing costs include government charges like transfer taxes and recording fees. They also include non-government costs such as title insurance and appraisal fees. Don’t be bashful. Guess what he paid in total.

Before I tell you what he paid, I will mention one of the more curious aspects of buying a new construction condo in NYC. That is, the developer/seller requires each buyer to sign a contract agreeing to pay the city and state transfer taxes — which happen to be taxes that the law levies against sellers. So the buyer of a new construction condo has the great privilege of paying their own closing costs and nearly all of the seller’s closing costs as well. For this transaction, the “seller” transfer taxes paid by my client were (1) the New York State Transfer Tax in the amount of $20,366.00 and (2) the New York City Transfer Tax in the amount of $72,550.31. So that’s a tidy $92,916.31 to start off with, for those of you keeping score at home. Was your guess higher than that? Of course, we haven’t yet reached a final tally.

Once upon a time, long ago in the 1980’s, only sellers paid the New York State Transfer Tax. In 1989, then-Governor Mario Cuomo helped pass the “Mansion Tax,” which required purchasers of real estate to start paying transfer taxes whenever they had the audacity to purchase real estate valued at more than $1 million. Political opponents briefly succeeded at branding it the “Cuomo Tax,” but the name really didn’t stick. Now people continue to unironically call it the mansion tax. Thus, it is not infrequent for a buyer of New York real estate to look up from their closing documents and say something to the following effect: “So … my apartment … is … a mansion?”  Polite laughter generally ensues.

So in any event my client thus paid an additional one percent, or $50,000.00, to the State of New York for his 2-bedroom mansion. Total so far: $142,916.31. How is your guess holding up? We are still not quite at the end, though.

Lest you think that New York is solely progressive in its taxation policies, please meet the New York Mortgage Recording Tax. This tax doesn’t apply to you if you happen to be rich enough to buy a piece of real estate without a mortgage. But if you are a normal person who needs to take a mortgage, then you pay the tax. It is the height of regressivity — a tax with a built-in carve out for the rich. Moreover, these tax rates do not play around. My client needed a mortgage in order to complete the purchase, and he paid a tax on that mortgage in the amount of $67,345. This brought the government haul to $210,261.31.

The Mortgage Recording Tax also levies a 25 basis point tax against the bank. So the lender paid $8,750.00 as its share of mortgage tax. That brought the government’s take up to $219,011.31. If you think that amount of revenue might satisfy the City, County and State of New York, you are wrong still. That is because several years ago, New York decided that a sales tax should be applied to certain closing services, even though they had never been taxed before. Due to that change in policy, my client paid a sales tax on some of his closing costs. Yes indeed. The state now taxes some of the closing costs. So that added another $43.93 to his bill. That wasn’t much salt for his wounds, but sometimes it’s just the thought that counts.

Is there more, you ask?

Why, yes. There is. In addition to the deed and mortgage recording taxes, my client also paid recording fees. In other words, one must pay the county clerk a fee to record the documents which in turn triggers the tax. His total recording fees were $1,020.

The final government take was $220,075.24.

For those interested, my client also paid roughly $25,000 in title insurance premiums, $20,000 in bank fees, $4,500 for the Seller’s legal fees (yes he paid those) plus an undisclosed amount for my fee. These weren’t part of the government take but it pushed his total closing costs to nearly $270,000.00.

Was your guess higher than that?  Either way, what’s the point of this?


One conclusion is that massive government revenues encourage profligate government spending. How else could a city afford to pay $400/hour for manual labor? As the New York Times reported last year with respect to the costs for subway construction,

“The labor deals negotiated between the unions and construction companies also ensure that workers are well paid. The agreement for Local 147, the union for the famed ‘sandhogs’ who dig the tunnels, includes a pay rate for most members of $111 per hour in salary and benefits. The pay doubles for overtime or Sunday work, which is common in transit construction. Weekend overtime pays quadruple — more than $400 per hour.”

The Times also observed that a similar system is being built in Paris at one-sixth the cost that New York is paying.  In another investigative work, the Times observed that the New York subway system employed nearly 2,500 managers at an average cost of $240,000 per year and that it did so at a time when those managers were systematically under-funding basic maintenance and safety projects. Empirical observation reveals that individuals with massive incomes are likely to spend money in dubious ways. This is not meant to embarrass Nicholas Cage or Johnny Depp, but simply to ask the question of whether it is reasonable to expect a government to be more fiscally responsible than the individual citizens it aggregates.


I am perfectly happy to live in a country where the state confiscates increasingly obscene amounts of wealth as one accumulates obscene amounts of wealth. My contentment is of course conditioned upon the state using its resources in a somewhat efficient manner in the pursuit of laudable goals like healthcare, education and national defense. This is my Plan A for American political development, even though it might lower my own material standard of living. I am less sanguine, but certainly contented, to live under a “starved beast” government that retires its debt, reduces taxation, limits its regulatory reach, and defers to state authority. That would be my Plan B for developing a workable American social compact. Unfortunately it seems seems that neither option is on the menu.

New York depicts the liberal state as a demonstrable failure. My client’s $220,000.00 tax payment would seem to be a sufficient tribute, especially when one considers that he paid these taxes with the net of his income that had already been taxed heavily by both city and state. One imagines a state, flush with these types of revenues, that is able to create an impressive set of social programs. Instead, New York soaks the rich — in precisely the way that a progressive would hope — and then it pours that money down the drain of politically-connected unions, contractors, and criminal enterprise. New York robs from the general rich and gives to the connected rich. A progressive promised land this is not.

One begins to consider Plan B, but alas: The modern GOP and its absurdist economics fail even more spectacularly than the tax-and-waste policies of New York. The failure of the GOP platform, idealogically speaking, is *not* found in the GOP desire to cut taxes for the rich while slashing food stamp benefits and Medicare. That is the progressive’s quarrel; It is not a conservative complaint.  The problem for the GOP, as a matter of dogma, is that the party wants to cut taxes for the super rich by adding trillions to the debt and moreover that the GOP is more than happy to finance these tax cuts for the rich by running trillion-dollar deficits, even during times of sustained economic growth. A party of fiscal responsibility this is is not.

One begins to ponder what Plan C might look like.

About Benjamin M. Adams
Recovering Attorney, Dad of Six, Concerned Citizen

One Response to NYC: Too Rich For its Own Good.

  1. Melissa Adams Reynolds says:

    I guessed $200,000. Not too far off.

    On Thu, Jun 14, 2018, 12:45 PM The Pretty Ugly Blog by Benjamin M. Adams wrote:

    > Benjamin M. Adams posted: “By Benjamin M. Adams on June 14, 2018 > @BenAdamsO_O A few years back, I represented the purchaser of a newly > constructed condominium apartment in Chelsea. It was a generous two-bedroom > and priced accordingly, at five million dollars. My client took a ” >


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