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FutureStarrMansion Madness Among Los Angeles Realtors
Some of LA's top brokers are forecasting an unprecedented sales year ahead, and they're not afraid to lower prices or offer special deals in order to move their homes off the market before the new wealth tax takes effect.
Last November, voters approved a tax that will raise the city's share of money from property sales from four percent to five percent for properties valued between $5 million and $10 million. This tax is meant to fund affordable housing projects and offer resources for tenants at risk of homelessness.
Millionaire homeowners in Los Angeles are cutting prices and offering deals as they race to sell their homes before an impending tax on the wealthy takes effect on April 1. This measure, known as the "mansion tax," was approved by voters last November and will impose a 4% transfer tax on properties sold for $5 million or more.
One wealthy homeowner is so eager to sell his extravagant estate that he's willing to take a substantial loss in order to meet the April 1 deadline. After searching for over a year for a buyer, this mansion owner has already reduced the price by more than $10 million in an attempt to attract potential buyers.
This glamorous property, situated in the highly desired Bel Air area, features six bedrooms, eleven bathrooms and a sun-drenched patio with unobstructed views of the Pacific Ocean. Additionally, it includes luxury amenities like a wine cellar, spa and sauna.
However, it's not the only high-end home in need of a quick sale. Another impressive listing - an expansive 12-bedroom mansion with panoramic views of the city - is currently listed for an eye-popping $139million.
This magnificent home stands out with its open-roof design that sets it apart from its more luxurious neighbors. Inside, the clean and classy finishes create a maze of spaces such as a games room, home-cinema, golf simulator and seven luxurious bedrooms to match. Glass walls allow you to take in views into an impressive car gallery filled with supercars - sure to please anyone who can afford the mansion.
According to CNBC, this isn't the first time a wealthy LA homeowner has been forced to sell their home for less than its true worth due to taxes. Last year, an ocean view Bel Air mansion sold for just a fraction of its original value.
Realtors have expressed concern that Los Angeles' wealth tax, which will levy a 4 percent city tax on any sale of a house costing more than $5 million, could hinder new construction in the city. Passed by voters last November, this new measure is intended to raise funds for affordable housing initiatives and homelessness prevention programs.
Millionaire realtors in Los Angeles are on a sell-off rampage as the city's wealth tax approaches. To move homes before April 1 deadline, they are slashing prices and offering sweetening deals to prospective buyers.
The wealthy aren't afraid to gamble with their money, but they understand that it comes with risks. So they take measures to manage these risks by having adequate insurance coverage and prioritizing protecting themselves from unexpected expenses like large medical bills; additionally, they don't waste money on frivolous pleasures.
They possess emergency funds and several months' worth of savings, enabling them to cover large expenses without resorting to credit cards or going into debt. This attitude is an essential element of having a rich mentality, which may ultimately aid them in attaining long-term financial success.
Leading Democratic presidential candidates have unveiled plans to raise taxes on the wealthy, and a majority of Americans support them. Though opinions on specific plans differ, a poll by The New York Times indicates that most Americans want to address inequality and believe government should tax the wealthy.
One popular method to achieve this is through a stepped-up basis, which taxes investment gains at a lower rate than income from wages. However, this is an intricate issue.
Many billionaires who own stock in public companies don't pay tax on their gains, even as they generate income from them. This has helped keep the top wealth-tax rate low, and it also explains why a significant portion of investment income goes to low-tax states like Florida - helping keep employment costs down for local communities.
The disparity in how wealthy and middle-class Americans pay their taxes stems from a complex web of laws. Not only does the tax code give wealthy investors preferential treatment for income from those assets, but they are also allowed to claim lower rates when earning from stocks, and no income taxes at all when those assets are passed on to heirs.
The catch is that the wealth tax, which would apply to individuals with worldwide net worths of $50 million or more, would remain in effect even if they sell their assets or move elsewhere. In other words, California's wealthiest could potentially pack up and leave for lower taxation jurisdictions even if they are currently headquartered here with assets still present.
On Thursday, several blue states joined the movement for a comprehensive overhaul of America's tax system by passing bills that would impose new wealth taxes. These measures all share one common goal: making sure those at the top pay more in taxes.
This populist argument has been around for years and has become a key theme of the 2020 presidential race. But its proposals face numerous obstacles, from lack of support to fears that many wealthy individuals will flee.
Despite these obstacles, a new coalition of legislators is spearheading this initiative - led by California Assemblymember Alex Lee. He is joined by other Southern California representatives such as Los Angeles Assemblymembers Wendy Carrillo and Miguel Santiago; Riverside County Assemblyman Corey Jackson; Inland Empire state Sens Lola Smallwood-Cuevas and Lena Gonzalez, among others.
Lee's bill, an updated version of a measure that passed the Assembly last year but was ultimately killed by Republicans in the state Senate, would apply to households with wealth exceeding $50 million and generate $21.6 billion annually in revenue according to its legislation. This money would go towards providing social services like affordable housing and child care programs for low-income individuals and families alike.
However, The Tax Foundation, a national advocacy group, has expressed opposition to this measure, contending it will create "perverse incentives" for wealthy individuals to avoid taxes by moving elsewhere. They fear that adding a wealth tax will further accelerate an already occurring exodus of taxpayers from states.
The proposed wealth tax stems from the fact that many successful entrepreneurs have chosen to build their businesses here and then sell or transfer them outside California, thus avoiding California's high income tax rate of 13.3%. While this strategy can save billionaires billions in taxes, it leaves millions who earn less and need assistance paying their bills in the state.
Los Angeles homeowners are racing to sell their expansive mansions before the April 1 wealth tax deadline. Under the new law, sellers of homes priced over $5 million must pay a 4 percent transfer tax, while those selling above $10 million face an additional 5.5 percent surcharge.
Real estate agents are offering discounts and incentives to attract buyers. One agent is offering to take $2 million off the price of a 260-acre undeveloped property in Bel Air, while others have cut back on their commissions.
Some luxury properties in Los Angeles are being advertised at $4.9m, just below the new tax cutoff, with buyers agreeing to cover closing costs instead of the sellers. According to Ken Fields, a Los Angeles real estate attorney, this move could lower prices for those who can afford it and save them money in the long run.
Scott Tamkin, a Los Angeles real estate agent, believes this measure may be too optimistic. He notes that over the past year, the median sale price of a house in LA has stayed close to $1m.
According to him, a $5m home may no longer qualify as true luxury property.
He emphasizes that the new tax could impede construction of more affordable housing in the city and could also hinder efforts to attract new businesses.
Tax concealment is a classic example of politicians concealing taxes. These tactics work on the psychological assumption that voters will be less informed about taxation or its effects if kept hidden from them.
Politicians use sneaky tactics to avoid paying taxes needed for spending, making it easier for them to raise the necessary funds. They rely on special interest groups for funding and lobbyists for advocacy on their behalf.
Politicians often employ timing gimmicks to conceal the cost of their proposals. For instance, they may structure a corporate tax-reform package so that initial savings would exceed long-term expenses. Unfortunately, this approach can create large revenue losses which will continue to compound over time.