Soak the Rich?

Yesterday, the Associated Press reported that millionaires are fleeing their luxury homes in New York to establish residency in less-taxing states. As a result, New York is receiving far less revenue than was expected from the wealthy since these wealth taxes were enacted last April.

Call it the law of unintended consequences.

To be fair, many of these losses come from scaled-back salaries and layoffs on Wall Street, but more than a few may be packing up and moving to more tax-friendly states such as Florida, Nevada and elsewhere–and are taking jobs with them. It is reported that billionaire Buffalo Sabres owner Tom Golisano who was paying $13000 a day in New York income taxes has moved to Florida. With him go 5000 jobs from Paychex, the Rochester, NY payroll processing company he owns. Rush Limbaugh has also given up his Manhattan home to escape excessive taxation.

Donald Trump tells Fox News that a number of his millionaire friends are also thinking of bailing from New York because of excessive taxation. Says AP:

“States also realized that having a higher tax rate than their neighbors would cost them talent, lose jobs and hinder economic growth, the foundation reported in May after Hawaii joined Maryland, New Jersey, California and New York to adopt a “millionaire’s tax.” New York, for example, has been careful not to raise its highest rates above New Jersey‘s, according to the foundation.”

In California, millionaires and job producers are already being heavily courted by Nevada, a state that is seeking to grow its employment base and fortunes with its minimal taxation and business-friendly environment: [youtube]http://www.youtube.com/watch?v=7pDKoX0uTwM[/youtube]

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A pair of $53.5 million New York Plaza penthouses were sold to Russian hedge-fund manager Andrei Vavilov–which would have made it the second-highest residential sale in New York City history.

Andrei Vavilov, though, is one very upset buyer. He and his wife, Russian actress Maryana Tsaregradskaya, are outraged with low 9 foot ceilings, an unexpected and massive column in the living room, and an exterior drainage grate that blocks the view of Central Park from the middle floor.

He had been promised the epitome of luxury, but was instead, he says, was given an “attic-like space.”

Attorneys for the buyer have reportedly filed a $31 million lawsuit against the developer and its selling agent Stribling.

It is unclear to me whether the transaction has actually closed. The story (see link below) does not make that clear. There is a $10.6 million deposit from the buyer at stake, and real estate attorneys handle closings in New York. Unlike most California real estate transactions, I am told it can be very difficult for New York buyers to reclaim their deposits.

Which leads me to wonder: Is the lawsuit and resultant publicity about the buyer’s recovery of a $10.6 million deposit–or actual defects in the real estate delivered?

MY SUITE AT PLAZA IS SOUR DEAL – New York Post

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Who are these young and ultra-affluent buyers of homes in Rancho Santa Fe, Palm Beach, La Jolla, Aspen and Manhattan?

Robert Frank, in his best-seller Richistan, calls them instapreneurs (didn’t he coin the term?).

These are the new titans in technologies, who have benefited from a rise in financial speculation and governments that support free trade and wealth.

Instapreneurs are not plodders when it comes to accumulating wealth. They don’t develop companies to last for family generation; rather, they may launch several companies over their career life spans. And the goal for each venture is a lucrative “exit strategy” that will create the fattest windfall possible.

What are these luxury buyers seeking when searching for their trophy home?

1. They are specific in their demands as to age of property, views, room volume, luxury closets, privacy, and entertaining areas.

2. Instapreneurs often wish to be near prestigious country clubs, where they can golf, play tennis and entertain business elite.

3. In San Diego, many of these nouveau uber-wealthy demand ocean frontage, ocean noise–and silent streets. Or the highest penthouse in downtown San Diego. The want what is rare, what is singular.

4. Instapreneurs often have children, and are concerned about the quality of nearby and private schools. How the home works for the kids can be of keen importance. Instaprenerual parents want safety, space and room for kiddie galas.

5. These luxury home buyers often have special room requests, such as a library, multiple offices, servant quarters, guest houses, snoring rooms, home gyms, massage rooms, a conservatory or even a panic room.

6. These busy people often demand to be not far from a major airport because of frequent travel demands and the desire to minimize time spent away from families.

We enjoy working with these interesting folk, not just because we enjoy finding perfect property fits, but also because of the stories we get to hear. Some have been scientists, some movers and shakers in technology, and some who just had the courage to pour everything they had into an idea whose time had come.

They all inspire and the world is a better place because of these producers.

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