The Shape of the Tax

The question

Many housing transaction taxes are notches: once the price crosses a threshold, the higher rate applies to the whole price. New York's 2019 budget created seven buyer-paid notches on one date, from $2 million to $25 million, and left the $1 million mansion tax unchanged. What does a schedule of notches do to sales, and what does that mean for the shape of a housing tax?

The paper compares prices at the same thresholds before and after the reform, with the $1 million threshold as a control. It then applies the result to New York City's mortgage recording tax, whose standard borrower schedule is 1.80–1.925% of recorded mortgage principal for the covered residential categories. The calculations are before credits, exemptions and consolidation adjustments.

Main findings

• 7.8 → 1.6sales at exactly $2 million relative to local density, before and after it became a taxed threshold
• 2–3×the tax jump: the range of prices emptied above the $2 million and $3 million thresholds after the reform
• $2–3Ma year of avoided tax at the new notches, if the extra sales below each threshold came from above it: 2–3% of the revenue the reform's schedule implies between $2 million and $6 million
• 1.41%of price for houses and 1.28% for condominiums: the gross recording charge the schedule implies on 172,725 observed loans, before credits and exemptions
• $244Ma year: a fixed-sample benchmark: the gross charge the schedule implies on four-borough residential purchase money, transactions held fixed, before credits, exemptions and consolidation adjustments; 98% of it measured on actual loans

Each new threshold's response is larger than the same measure at any of sixteen never-taxed round prices, and a year-by-year check shows it starting with the reform. The tax figures are gross schedule-implied charges and fixed-transaction costings. They do not identify who ultimately bears the tax, how sales would respond to a continuous tax, or an optimal rate.

Why it matters

• Even a quarter-point notch relocates transactions, and responses did not rise in proportion to the rate, so the shape of a schedule matters as well as its level.
• Debates over taxing cash purchases rarely start from the fact that the code already charges the financed buyer. That statutory difference can be measured directly from loans, without relying on a contested price gap.
• A fixed-transaction costing gives legislators the order of magnitude of a purchase-money carve-out and of continuous schedules that match it within the sample.

Cite this paper

@misc{loschi2026shape,
  author       = {Loschi, Pablo},
  title        = {The Shape of the Tax: Transaction Shifting at New York
                  City's 2019 Transfer-Tax Notches and the Mortgage
                  Recording Tax},
  year         = {2026},
  howpublished = {Working paper, Zenodo},
  doi          = {10.5281/zenodo.22925301}
}