‘Kudlow’ panelists Steve Forbes and Steve Moore give their take on the tax rate debate.
Blue states around the U.S. are planning tax hikes on wealthy residents to bring in additional revenue through a variety of proposals, including one state’s so-called “Taylor Swift tax.”
The moves come after the enactment of the One Big Beautiful Bill Act (OBBBA) by President Donald Trump and Republicans in Congress, which permanently extended many of the 2017 tax cuts and included other new tax relief provisions as well as spending cuts to programs such as Medicaid.
Democrats argue these tax hike proposals are needed to help plug gaps in state budgets and offset any lost federal dollars for Medicaid and other programs.
The state of Rhode Island enacted a new tax this summer that will impose a special levy on vacation homes valued at $1 million or more, which has become known as the “Taylor Swift tax” due to the music star owning a home in an affluent part of Westerly, Rhode Island, The Wall Street Journal reported.
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Washington is among states planning to raise taxes on wealthy residents. (George Rose/Getty Images / Getty Images)
Rhode Island’s “Taylor Swift tax” imposes a tax of $2.50 for every $500 of assessed value above $1 million, which a Realtor.com analysis estimated would result in an additional $136,000 in property taxes on her luxury home in the Watch Hill neighborhood that’s valued at $17 million.
Montana wants to increase property taxes on non-primary residences, adopting a new reform that will reduce property tax rates for owner-occupied primary homes while hiking the rate to 1.9% for second homes or short-term rentals, with industrial properties also set to face higher levies.
Lawmakers want to provide not only a tax break to about 230,000 homeowners, but incentivize owners of vacation properties or second homes to sell those properties to inject more inventory into a tight real estate market, Realtor.com reported.
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Several states have moved to raise taxes on wealthy residents to increase tax collections. (iStock / iStock)
This spring, Maryland enacted a new tax policy that raises income tax rates on residents earning over $500,000 a year to narrow the state’s budget deficit.
Another state in the Northeast is also mulling a tax hike on wealthy residents, with lawmakers in Connecticut considering legislation that would raise income tax rates on individuals earning $250,000 or more, or twice that amount for couples, to help offset an anticipated decrease in federal funding.
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Taylor Swift’s luxury beach house in Rhode Island. (Matthew J. Lee/The Boston Globe via Getty Images / Getty Images)
The state of Washington this spring passed a budget that will raise its capital gains tax from 7% to 9%, though the tax’s structure excludes real estate sales and focuses on other transactions like those involving stocks, bonds or business interests. Washington doesn’t have an income tax, and the state constitution prohibits one.
Washington has in the past seen wealthy residents depart the state to avoid the high tax burden, such as when Amazon founder Jeff Bezos left for low-tax Florida.
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That phenomenon has occurred in other high-tax states, such as California, New York, New Jersey and Illinois, which have seen wealthy residents and corporations leave in favor of states with lower taxes.