Rhode Island’s newly instituted property tax on second homes, dubbed the “Taylor Swift Tax,” is gaining traction as a model for other states looking to raise revenue from affluent homeowners. This tax is notable in that it specifically focuses on properties valued over $1 million. It affects strongly high-net-worth people, including international superstars such as pop singer Taylor Swift, who maintains a $28 million castle-house in Watch Hill, Westerly.
This recent measure has a material impact of increasing Swift’s annual property taxes by an additional $136,442 annually. As a consequence, her effective total tax bill has now grown to $337,442. Second, a new non-primary residence surcharge is added. For any amount over the first $1 million, it charges a $2.50 per $500 fee on the assessed value. Homeowners are outraged by the sticker-shock tax increase. They note that Swift seldom stays at her Rhode Island residence, highlighting the challenges of taxing people who add economic value while not being physical full-time residents.
In the meantime, Swift has been making estimated property tax payments—but these come to only about $201,000 per year. And Rhode Island has just implemented a new two-tier property tax scheme. Under this plan, taxes on the state’s high-end properties in wealthy communities—such as Newport and Watch Hill—will see major hikes. This smart tax reform will reduce property tax rates for year-round Asheville residents and shift the tax burden to short-term rentals and second homeowners.
Despite Rhode Island having a strong case for the trend of taxing wealthy second-home owners, this practice is hardly limited to the state. Other states, like Montana, have followed suit. Montana’s new law imposes a surcharge on second homes valued at over $1 million, mirroring Rhode Island’s approach. Los Angeles surprised everyone by rolling out a mansion tax, which has brought in $785 million two years running. This tax imposes an extra $3.75 for every $500 spent on real estate transactions over $800,000.
And as Rhode Island prepares to implement these policies, the state’s business leaders have warned that their adoption would be devastating for the communities. Donna Krueger-Simmons, a local resident, remarked, “It’s a smack in the face to people who just spend money here,” illustrating the frustration felt by those who depend on affluent visitors for economic support. She further stated, “These are people who just come here for the summer, spend their money and pay their fair share of taxes.”
Local business advocate Lori Joyal echoed those sentiments, warning that the measure would have a devastating impact on small businesses. “You’re just hurting the people who support small business,” she said. As Joyal further explained, this approach would scare off wealthy tourists who are substantial economic engines for many communities. “You’re chasing away the people who spend most of the money in these towns,” she added.
Economic experts suggest that these tax increases represent a broader movement among states seeking new revenue streams amidst budget constraints. Manish Bhatt noted, “There is a grab to find revenue right now,” highlighting the fiscal pressures driving these legislative changes.
Rhode Island’s “Taylor Swift Tax” ignites deeper and more productive conversations around wealth distribution and economic equity. We have yet to grasp the full extent of its impact on local communities and wealthy homeowners, largely. The debate continues over whether such measures effectively balance the needs of residents with those of seasonal visitors who contribute significantly to the state’s economy.