States Should Turn to Mansion Taxes to Raise Needed Revenue in 2026

Taxes work best when they ask more from those who have more to give and fund services that support our communities. Mansion taxes can bring state codes closer to this goal, effectively counter the concerning trend of harmful cuts, and equitably raise revenue to meet the challenges states face.

Three states this year have enacted or increased mansion taxes — progressive real estate transfer taxes that tax the sale of high-value properties, like mansions or vacation homes, at a higher rate than less valuable properties like starter homes.

• Maine made its real estate transfer tax progressive by taxing sales of property worth over $1 million at a higher rate. This change is projected to bring in over $45 million over the next four years (noteworthy in a state of only 1.4 million people). Some revenue will supplement Maine’s general fund to be used for any number of investments in health, education, infrastructure, and more. The rest will support housing programs, including developing affordable housing, assisting first-time homebuyers, providing rental assistance, and supporting people experiencing homelessness.
• Rhode Island increased its real estate transfer tax rate — both the rate that applies to all property sales and the supplemental rate applying to the portion of a property’s value above $800,000 — in its annual budget. The legislature also tied the $800,000 threshold to inflation. Like Maine, the funds from this increase (about $19 million per year for the state and $15 million per year for local governments starting in 2027) will be dedicated to producing affordable housing and providing resources to people experiencing homelessness. (A separate provision increased property taxes on vacation homes.)
• New Jersey increased its transfer tax by adding more rate tiers for properties selling for over $2 million. Revenue estimates have yet to be released, but in the past year, New Jersey’s realty transfer fee raised over $430 million.

These states’ progress builds upon the momentum of state and local governments taxing wealth through high-value real estate. Last year, Washington, D.C. increased its property tax rate for high-value homes, and this year, Montana and Rhode Island (as noted above) increased property taxes for vacation homes. In addition to the now eight states (plus D.C.) that have mansion taxes, 17 cities have implemented their own progressive real estate transfer taxes, with the vast majority having been enacted or expanded in the past eight years.

Mansion taxes are a promising option for states looking to fund housing-related programs or simply recover from the fiscal damage the Republican megabill, enacted in July, will inflict on state and local governments. When properly designed, these taxes can be an effective tool for rebalancing state and local tax codes to be less skewed in favor of the wealthy at everyone else’s expense. They are also capable of raising substantial revenue to the tune of millions or even billions of dollars, depending on a state’s housing market.

In the coming 2026 state legislative session, when legislators deliberate how best to navigate the severe fiscal uncertainty of the coming years, policymakers would do well to follow Maine, New Jersey, and Rhode Island’s lead when it comes to creating or expanding taxes on high-value homes.