If a proposed tax goes into effect next year, Taylor Swift stands to pay an additional $136,000 annually to the state of Rhode Island for her oceanside mansion. But though the tax is nicknamed for the pop star, she’s hardly the only one who would be affected by it.
A decade after advocates first tried to pass the so-called “Taylor Swift tax” on non-owner-occupied homes in the state legislature, a budget bill that includes a new version of the tax reached Gov. Dan McKee’s desk last week. As proposed, owners would pay $2.50 per $500 of the assessed value of homes worth more than $1 million that aren't their primary residence, on top of the property taxes they already pay local governments. Homes would be exempt if they are rented for more than half of the year.
Revenue from the tax would be dedicated to a fund designed to spur low-income housing development, according to the budget bill. The state ranked last in the United States in terms of its pace of housing development, according to U.S. Census data collected from April 2020 through July 2023. The state’s single-family home median sales price in May was $512,750, according to the Rhode Island Association of Realtors, more than $50,000 higher than one year earlier.
“We are pleased that the budget recognizes that ongoing investments in … housing production are essential and must be prioritized,” advocacy groups Housing Network of Rhode Island and Homes for RI said in a joint statement earlier this month.
A spokesperson for McKee did not immediately respond to a question about whether the governor would likely sign the budget bill with the tax provision included.
Previous version of the 'Taylor Swift tax'
Another version of the proposed tax for luxury vacation homes in Rhode Island came about in 2015 after Swift purchased a seven-bedroom mansion in the historic Watch Hill neighborhood in the resort town of Westerly. Swift bought the Gilded Age mansion for $17.75 million in 2013 and wrote a song, "The Last Great American Dynasty," inspired by one of the home's former owners that was featured on her "Folklore" album in 2020.
Town of Westerly records show that Swift's seaside getaway was recently assessed at about $21 million.
The Rhode Island Association of Realtors opposes the tax as it did the first time it was proposed in 2015, according to Chris Whitten, the group’s president. Back then the tax would have been $2.50 per $1,000, he said, so now legislators have doubled the potential revenue.
“We’re not building as much as we need, and we have very little inventory, so we need to be working on sensible construction to heal our housing market,” Whitten told Homes.com. “Instead, we’re seeing them taxing our housing even more, which is going to drive us down a road we really don’t want to be on.”
That road is already leading some potential buyers toward listings in neighboring Massachusetts and Connecticut, Whitten said, based on anecdotal conversations he’s had with fellow real estate agents.
The risk isn’t just to people looking to move to Rhode Island, Whitten said. As the state’s median sales price has rapidly risen, one in five sellers is now marketing homes for $1 million or more. That’s 20% of all home sales, compared to just over 11% in 2019, he said. Many of the affected properties are on or close to the water, since much of the state abuts the Atlantic Ocean or Narragansett Bay.
Some of the owners who will have to pay the tax share their houses among various family members for vacation use, Whitten said.
“We’re more afraid for families that own homes on the water and have passed them down generation to generation. These aren’t $80 million homes, they are $1.4 million homes, modest little beach houses,” Whitten said.