Work is finishing up on the tallest residential building in the Western hemisphere, 432 Park Ave. The penthouse apartments will go for around $100 million each. Here’s how the building compares to the total property values in some well-known American cities:
That’s a pretty valuable piece of property.
As you know, I’ve often advocated a policy that progressive economists used to love, replacing income taxes with progressive consumption taxes. In some cases it is hard to actually enact progressive consumption taxes (although not as hard as many assume). But in other cases it’s fairly easy. I’ve often been dismayed to find out that progressive politicians like Ted Kennedy opposed luxury taxes on yachts, expensive cars, and fancy jets.
Real estate is one of the easiest forms of consumption to hit with a progressive tax. We already have property taxes, and we already estimate the value of properties. Just do it!
Unfortunately, liberal cities like New York do exactly the opposite, taxing the most expensive properties at far lower rates than average properties. Those penthouse units may end being appraised at closer to $6 million, barely 6% of the actual market value:
Because of an odd idiosyncrasy in the New York City property tax system, the “market values” that the City assigns to real estate are not market values at all. For condos and coops, these values are generated by an antiquated pricing model, which underestimates true property values by as much as 95%.
An extreme example is this $100m penthouse, the most expensive sale ever in NYC. Despite having been purchased just six months ago, its official “market value” is reported as only $6m.
Here’s the ratio of appraised value to actual value by borough:
Notice that wealthy Manhattan is especially under-taxed. And we see the same thing if we look at the ratio by price range:
I would find it much easier to accept the current progressive obsession over inequality if I saw more interest in progressive consumption taxes. The rich can do one of three things with their money; invest it, donate it to charity, or consume it. If you aren’t taxing luxury consumption, you aren’t taxing the rich. A billionaire trust fund baby, non-smoker, non-lottery player, can put all their wealth into muni’s and live in a $100 million penthouse paying an absurdly low tax rate. Meanwhile a working class guy in Queens who plays the lottery and smokes and has an average house gets hammered by NYC taxes. That’s not fair! (And let’s not even talk about carbon footprints.)
PS. 432 Park is one of the few modern tall buildings with pleasant architecture. The interiors are very minimalistic, if that’s your thing. Pencil thin and about 100 floors tall, with six perfectly square windows on each side, all the way up. Lots of white marble:
I don’t generally envy the rich, as I have little interest in their lifestyle. But even I have a tinge of envy when I think about how happy I’d be if I owned that bathroom. All that white makes me want to put on the Beatles White album (You say you want a revolution . . . )
And I’m in the top (global) 1%! 
Don’t care for that chandelier. Hopefully the tasteful monochrome interior will never be messed up with colorful children’s toys.