'Taylor Swift Tax' stirs bad blood with Rhode Island homeowners

Rhode Island's new tax on second homes is nicknamed for its most famous part-time resident, music superstar Taylor Swift, but the levy will also squeeze owners of saltbox houses on the coast that are much less grand than the singer's Holiday House mansion.

Under an annual property tax measure that takes effect Wednesday, the state will collect $5 for every $1,000 that a vacation home's value is assessed over $1 million. Rhode Island lawmakers passed the measure last year, targeting out-of-towners in coastal enclaves like Newport and Little Compton to raise revenue for affordable housing construction. 

For Swift, whose 12,700-square-foot Watch Hill mansion is assessed today at $28 million, that will mean an extra tax bill of about $136,000. She sings about the backstory of Holiday House in her 2020 track "The Last Great American Dynasty" and has used the five-acre oceanside estate to host Fourth of July bashes featuring celebrities like Blake Lively and Selena Gomez. Despite much speculation about a Rhode Island wedding, she and her fiancé, Kansas City Chiefs tight end Travis Kelce, are instead planning a star-studded Madison Square Garden soiree taking place later this week, outlets including the New York Times have reported.

The loudest protests over the tax though are coming not from billionaires like Swift, but those who own vacation properties that have been in their families for generations. While the homes are often small, their assessed values can be high, given the pricey oceanside land they sit on. Officials recently mailed notices to owners of more than 8,000 properties that may be subject to the tax. Property tax bills are set to rise by 50% or more for some homeowners.

"We can do this for the time being, but as we get older and the property gets more expensive, it may squeeze us to the point we have to sell," said Ed Burke, an 83-year-old Boston resident who shares a 1,900-square-foot, nearly century-old cottage in Middletown with his brother and their families.

Democratic leaders are increasingly adopting tax-the-rich policies in response to voter concerns about the cost of living and the nation's stark inequalities of income and wealth. Rhode Island enacted a millionaire tax in June, joining states including Massachusetts and Maine, while California voters will decide on a blockbuster tax on net worth in November. New York City Mayor Zohran Mamdani successfully pushed through his own second-home tax, which also takes effect Wednesday, after spotlighting Citadel founder Ken Griffin's $238 million Manhattan penthouse.

While Griffin has publicly sparred with Mamdani over New York's tax, Swift hasn't addressed being singled out in connection with the Rhode Island second-home levy. Her publicist, Tree Paine, didn't have a comment about the tax. 

The Rhode Island example shows it's not just the ultra-wealthy getting squeezed by these new levies and in this case, the payoff is limited. Officials project that the second-home tax will bring in $24.5 million in the fiscal year that begins Wednesday, a tiny fraction of the $15.2 billion state budget. They expect there will be a high level of non-compliance initially, given the tax's complexity.

Several coastal towns began charging higher rates for non-owner occupied homes over the past decade and the statewide levy now sits on top of that. Burke estimates his family's property taxes will now be about $34,000 annually, more than 50% higher than what they'd pay without the Swift tax and the vacation home rate that Middletown implemented in 2022. At least one family member's been living in the house most of the year, but Burke's concerned he'll still have to pay a second-home tax of about $6,500. 

For "the people who are middle-of-the-road with second homes, it does make a big difference," said David Huberman, a real estate agent with Gustave White Sotheby's International Realty in Newport.

As summer residents arrive in Rhode Island, they're commiserating over their higher tax bills in cafes and on oceanside paths. The law firm Hinckley Allen & Snyder LLP expects to file a lawsuit on behalf of homeowners challenging the tax on constitutional grounds early this month, according to Providence-based partner Gerald Petros.

Rebecca Holt Fine, a Rockland County, New York, resident whose extended family owns a one-story, three-bedroom Watch Hill cottage, is considering joining the legal action. Homes rented out for most of the year are exempt from the tax, but many older New England vacation homes lack heating or insulation. Fine's family's house, purchased by her great-grandfather in the 1930s, is essentially unrentable for a large chunk of the year. Their Swift tax will come to about $27,000 annually, based on their half-acre oceanfront property's $6.4 million assessment.

"It's one-size-fits-all, which really isn't fair," she said. "It's very sad to think we'd have to let it go just because of this tax."

At least so far, deep-pocketed buyers appear to be shaking off the tax. Luxury-home sale prices in the Providence area increased 6.3% year-over-year to $1.7 million for the three months ending in May, a bigger jump than the national average, according to Redfin Corp. data. That's in large part because of the tight inventory, agents say. Still, Huberman said one Texas resident who kept a boat off Newport called off his search for a $10 million to $20 million home after the levy passed. 

The tax's supporters argue it's needed to help offset federal cuts to Medicaid and other programs and to make housing more affordable for year-round Rhode Island residents. The state's median single-family home price has nearly doubled since 2019, to $493,500, according to first-quarter Rhode Island Association of Realtors data. Revenue from the tax goes to a low-income housing tax credit fund.

State Senator Meghan Kallman, a Democrat who sponsored the tax, said the levy both addresses an upside-down tax system that favors the wealthy and boosts affordable housing in a state where a third of households are paying more than one-third of their income toward housing. 

"I get that not everybody is Taylor Swift, but if someone is successfully maintaining a second home and they'd be touched by this policy change, that tells me their economic situation is able to sustain it," she said.