This opinion piece was recently published in the News and Observer.
Transfer Tax targets the few
By Tim Minton
Executive Vice President, Home Builders Association of Raleigh-Wake County
Across Wake County, urban and suburban growth is occurring at unprecedented levels. Every day, our residents are confronted with the reality that low unemployment and high quality of life produce a place where people want to live.
The issue of funding new infrastructure such as good schools, transportation, clean water and open space to ensure a high quality of life for our residents remains hotly debated.
One proposed and vehemently opposed plan calls for "fair growth funding". Its proponents suggest the creation of a 1 percent tax on the sale of all residential property. Unlike property taxes, these real estate transfer taxes are taxes that are assessed on real property when ownership of the property is transferred between parties.
The Home Builders Association of Raleigh-Wake County fervently opposes the imposition of real estate transfer taxes or fees that prevent citizens from owning a home.
Real estate transfer taxes and fees are a major burden to buyers and sellers, particularly at time of closing. Transfer taxes are very narrowly based forms of taxation that place a disproportionate burden on a small percentage of residents rather than spreading it equitably to all residents who benefit from the growth of our community.
It is not exactly a "fair growth funding" to unfairly places the burden of funding on one sector of our economy and a comparatively small number of people.
Transfer taxes are grossly unfair to current residents, because the tax is paid by the seller. These taxes penalize the many homebuyers who already live here. These current residents do not place any more of a strain on public services simply by moving to a different house within the same community.
Additionally, these taxes and fees:
- Have a negative impact on housing costs and economic development, and reduce housing opportunities across the income spectrum. Low-to-moderate income and first-time homebuyers who attempt to purchase a home could pay a tax greater than their down payment. Affordability is already an acute problem in most counties and these taxes would only worsen that problem.
- Are a particularly poor revenue source for the general operating budgets of state and local governments because of their extreme volatility. Tax revenues generated by transfer taxes are largely dependent upon economic cycles and thus fluctuate over time. This makes it extremely difficult to use those revenues to fund bond issues or to cash flow infrastructure development projects.
- Cause state and counties to become less competitive. The higher cost of new and existing housing resulting from new or increased transfer taxes would make our area less attractive for industrial recruitment. In addition, a local land transfer tax would result in higher home prices and drive home buyers to more affordable adjoining counties, thereby reducing opportunities for an area's existing retailers, lenders and service providers in many business sectors.
Our citizens enjoy the growth of our county. They understand that their quality of life does come at a cost. However, a recent poll revealed that more than half of our current residents are resistant to the idea of a real estate tax. They realize that transfer taxes are just another means to get a few citizens to pay for something from which everyone benefits.
The Home Builders Association of Raleigh-Wake County believes that a broad-based tax approach where is the correct way to raise revenues for Wake County and the entire state. It will allow for lower tax rates and a more equitable way to share the burden of funding infrastructure needs throughout our county.