This week’s been rough for proponents of New York City’s pied-à-terre tax. On Monday, former Commerce Secretary Wilbur Ross filed a lawsuit against the state, calling the tax unconstitutional. On Tuesday, a judge ruled the city had to rollback the notices it sent out to property owners and all but basically start over. It follows a hectic rollout, coupled with threats and warnings that the young mayor’s video announcing the tax outside of billionaire Ken Griffin’s house would lead to the ouster of high-price items from the city. Those threats never formed.
What did, however, were the lawsuits. Ross on Monday joined a growing list of people who are suing either the city or the state over the tax. In an interview with Fortune, Ross said the new tax on luxury second homes targets the one group of owners who can’t vote against it.
“They don’t want voter retribution for taxes at the ballot box, so they impose these taxes on people who have no way to defend themselves,” Ross said. “That’s what this is all about.”
Ross, his wife, Hilary Geary Ross, and casino developer Steve Wynn sued the State of New York on Monday in Suffolk County Supreme Court. They argue the pied-à-terre surcharge violates both the state and U.S. constitutions. All three are Florida residents who own Manhattan apartments, and according to the complaint, the city’s Department of Finance billed the Rosses $83,531.52 on their co-op and Wynn $183,094.69.
Ross’ suit
Led by Pillsbury Winthrop Shaw Pittman partner James Catterson, Ross’ suit has three main arguments. The first is that the “surcharge” is really a property tax, based on property value, billed through the city’s property tax system and becomes a lien on the home if unpaid. The complaint claims it violates the state constitution because the constitution caps how much the city can raise through real-estate taxes. The new law says surcharge revenue doesn’t count toward that cap.
“The state, by fiat, cannot change the constitutional reality of what it is,” Ross said. “Surcharge on what?”
The complaint also argues taxing owners based on where they live discriminates against out-of-state residents. The suit says that violates the U.S. Constitution’s Privileges and Immunities and Commerce clauses, as well as equal protection guarantees in the federal and state constitutions.
“By their theory, there’s no limit to what they could do to non-residents,” Ross said. “We’ll put 100% tax every year on the property. 200%.”
Ross rejected officials’ claims that part-time owners don’t pay their share. He said owners subject to the tax use none of the city’s spending on education or health and welfare, and less policing, fire protection, and trash pickup, because they spend less than half the year in the city.
“How can you possibly consume more in less than six months than other people do in a whole year?” he said. He said nonresidents already pay more because their homes are worth more, and because nonresident co-op and condo owners don’t get the tax abatement given to primary residents.
“If my next-door neighbor in the building is a resident and he has the same size apartment I have, I pay more than he does,” he said.
When Fortune reiterated that the tax, according to NY Gov. Kathy Hochul, was meant to close the gap on New York property owners who “do not live in the City or pay City income tax,” Ross said: “There is no gap. This is an imaginary gap.”
He doesn’t object to higher taxes on the wealthy as long as the rate applies to everyone in a bracket.
“I don’t think it’s a good idea, but it’s legal,” he said.
Making the case
Forbes put Ross’ net worth at around $600 million in 2019, following some controversy alleging he inflated his net worth to be between $2.7 billion to $3.7 billion. Regardless, he and Steve Wynn (with a net worth of $4.3 billion per Forbes) are proving why there’s a need for the pied-à-terre tax in the first place, according to Hochul’s office.
“When Steve Wynn and Wilbur Ross try to cast themselves as sympathetic figures in a fight over paying their fair share on multimillion-dollar second homes, they’re making the case for the pied-à-terre tax as well as anyone could,” Jen Goodman, Hochul’s director of rapid response, told Fortune in a statement.
“Governor Hochul believes some of the wealthiest people in the world, and the powerful interest groups fighting on their behalf, can afford to help pay for the police officers, trash pickup and snow removal that keep New York City running,” she continued. “The Governor was proud to sign this legislation, and the state will defend it in court.”
Ross called the statement “silly” and said it didn’t address the legal question.
“It either is constitutional or it isn’t,” he said. “Unconstitutional is unconstitutional.”
Matt Rauschenbach, a spokesperson for New York City Mayor Zohran Mamdani, told Fortune in a statement that “the pied-a-terre surcharge demands that the wealthiest people who own second homes in NYC but don’t live in them pay their fair share towards funding safer streets, cleaner parks, and better schools.”
“The City is moving to intervene in these suits and will stand with our partners in Albany to defend the surcharge,” he continued. “And while the legal process moves forward, we will continue administering the surcharge fairly, efficiently, and in full compliance with the law, as we have done from day one.”
Still, Ross thinks the statements do little to address the unconstitutionality of the tax—and that he indeed does spend money in the city even if they’re rarely here.
“We aren’t here that much, so we have to ration what we do,” he said. “We eat out all the time. We shop here. We use Ubers and cars and things like that. So we do spend money here, and we help some of the cultural institutions.”
He said that spending supports jobs whose workers pay city income tax. Owners subject to the tax “hire more maids, use more drivers, use more Ubers, use more taxis, buy more things in the stores, support the charities more,” he said. “You can’t just look at it the other way. You’ve got to take everything into account.”
