A new push by states to tax the real estate of the wealthy is going nationwide with cities across the country looking at expensive second homes as the gold mine to solve all their social problems. What is the new “Taylor Swift Tax”? What are some of the new proposals and will you be impacted? Is taxing wealthy homeowners the best solution to the housing crisis.
The Taylor Swift Tax in Rhode Island:
Rhode Island’s new levy, nicknamed “The Taylor Swift Tax,” is among the most extreme. The popstar bought a beach house in the state’s elite Watch Hill community in 2013.
The measure imposes a new surcharge on second homes valued at more than $1 million. For non-primary residences, or those not occupied for more than 182 days a year, the state will charge $2.50 for every $500 in assessed value above the first $1 million. That charge is on top of existing property taxes and will add up to big increases for luxury homes in Newport, Watch Hill and other well-heeled, summer communities in the state.
Swift’s house, for instance, is assessed at around $28 million, according to local real estate records. Her current property taxes are estimated at around $201,000 a year. The new charges will add another $136,442 to her annual taxes, bringing her yearly total to $337,442 – even though locals say she rarely visits.
The crazy part is that RI is already a very high tax state so most with second homes do not want to be burdened as a primary residence so there is no way they will use the house more than 182 days as that would make them a primary resident of the state and subject to huge income/estate taxes.
Other Cities/States are proposing similar initiatives:
States including Montana, California, and Colorado are jumping on the bandwagon to raise revenue from wealthy homeowners and this trend appears to be accelerating.
What is in the proposal to tax vacant homes in Colorado?
A consortium of mountain towns pushed Colorado lawmakers this year to pass legislation allowing local governments to ask voters to tax homes that sit empty for most of the year.
There are no communities in Colorado that tax empty homes yet, but the growing challenge of building affordable housing for workers in mountain communities where real estate prices are soaring and as many as 40% of homes are unoccupied by full-time residents is fueling creative thinking around new revenue sources.
“We are not asking the legislature to make it so. This just clears some potential land mines for communities who might want to do this,” said Jonathan Godes, a councilman in Glenwood Springs and president of the Colorado Association of Ski Towns, or CAST, which is promoting the legislation for the coming session.
Vacancy tax supposedly aims to increase long term rentals
The proposal from CAST (Colorado association of Ski towns) says the vacancy tax legislation would authorize local governments “to disincentivize those vacancies.” “Local programs could then use the tax revenue to incentivize renting those vacant homes to the local workforce,” a position statement from the association reads.
I’m not sure what world the association of ski towns is living in, but someone who owns a 4 million dollar house that is used as a second home is not going to turn the house into a long term rental. The numbers would never work.
Let’s assume that someone owns a 4 million dollar house, based on the 10 year treasury, one would likely want a return of about 6% at a minimum on their money which means the rent would be 20k/month + tax and insurance. If someone can pay 20k/month they would have to make over 600k/year, definitely not targeting the local workforce!
Are nightly rentals considered “vacant”
This brings up an interesting question, are nightly rentals exempt from the “vacant” tax? My initial thoughts are that they would be exempt as they are “occupied”. This brings up a huge issue, why would local governments encourage even more nightly rentals through this legislation while at the same time they are restricting the number of licenses, locations, etc… This makes no sense from a logical point of view. Furthermore, by incentivizing more nightly rentals, each town would in turn need more service workers that can’t afford to live in the area further perpetuating the housing crisis we are seeing in each ski town.
Is taxing vacant homes really the best strategy
When you think of Colorado’s ski towns or really any high end resort community taxing second homes is a bad idea. I’m going to differentiate between second homeowners that solely use their properties for personal use as opposed to nightly rentals. Assume there is a second homeowner who has a 4m dollar home in Steamboat. That owner currently pays the same amount as a primary resident yet uses very few services. For example, they don’t use the schools for their kids, yet still pay taxes for them. They only drive on the roads maybe 90 days a year yet pay the same as a resident who uses them daily. When they are in town they spend a lot of money at restaurants, shopping, etc… Many are large donors for nonprofits in the community. So, I’m not sure from a “fairness” standpoint second homeowners should pay more.
On the flip side the argument is that someone who has a 4 million second home can afford to pay more taxes. Regardless of which camp you are in, segregating property types based on occupancy creates some thorny questions of fairness, etc…
Affordable housing will not be solved with more taxes
The root cause of the affordable housing crisis in every Resort town with a number of second homes is that lower paid workers are required to run the resort economy from servers to lift operators, etc… Very few, if any, of these employees are making enough to buy property in the towns they work. With median home prices in many resort towns averaging 2 million and up it is not feasible to afford a market rate property.
Unfortunately the solution continues to be to tax property owners more which incentivizes even more short term rentals for property owners to make ends meet with the increase in expenses. This in turn requires even more workers that still can’t afford to live in the town thereby creating the crisis we are in today.
The Taylor swift tax debacle
The vacancy tax is not just theoretical as Rhode Island and cities throughout the country are implementing taxes for expensive second homes. For example Steamboat’s city council had already proposed a prospective ballot initiative in order to help fill any budget shortfalls. Ironically the reason for the budget shortfalls is huge overspending coupled with unfettered growth and encouragement of tourism that is not paying its way for the services required. Instead of actually addressing the root causes of budget issues (see my prior article on this topic), the city council is merely grabbing more money to sweep away the problem.
A vacancy tax is a bad idea for resort towns as it will have the opposite impact by requiring even more workers and housing due to increased nightly rentals. The vacancy tax will do nothing to “incentive” owners to rent long term as the numbers just do not work. It is not possible for workers to make enough money in order to pay for the rent on a multi million dollar home.
By implementing a vacancy tax, resort towns will make matters considerably worse for current workers and demand will merely increase for housing. Furthermore, a second home provides substantial value to a community, they pay the same taxes as a full time resident and yet use very little of the same services (schools, etc..). Resort towns should be taking the exact opposite approach and encourage more to keep their houses vacant if they cannot rent to a local worker. This would substantially help the community as tax revenue remains high, and the impacts of tourism are mitigated.
Additional reading/resources
- https://www.cnbc.com/2025/08/31/taylor-swift-tax-on-high-end-vacation-homes-spreads-to-more-states.html
- https://coloradosun.com/2024/08/07/colorado-ski-towns-vacancy-tax/
- https://coloradohardmoney.com/second-homeowners-charged-higher-property-taxes-in-colorado/
- https://www.summitdaily.com/news/colorado-mountain-towns-home-short-term-rental-tax/
- https://coloradohardmoney.com/every-colorado-ski-town-has-made-one-huge-mistake/
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