May 9, 2008REAL ESTATE TRANSFER TAX
Proposals have circulated seeking an increase in the real estate transfer tax to fund school construction at the Delaware Technical and Community College (DTCC).BACKGROUND:
The transfer tax is a real property transfer tax on a home, land or business. It is an upfront charge that cannot be added to the mortgage and paid at settlement. Delaware currently has one of the highest transfer tax rates in the country. Pursuant to Senate Concurrent Resolution 22, The Bond Bill Committee Chairs released a report On November 28th making a recommendation to create a Community College Infrastructure Fund and increase the Realty Transfer Tax by .28% to 3.28% and dedicate revenue generated to the Fund.IMPACT:
Real estate transfer taxes and fees are a major burden to buyers and sellers. It affects anyone selling their home, land or business including new entrants in the home market, seniors downsizing who have to pay the tax for the privilege of selling their home, churches, civic groups and military families transferred to another community who must sell their homes. Real estate transfer taxes and fees have a negative impact on housing costs and therefore, on economic development.
Real Estate Taxes are regressive because the tax burden is higher for lower income households.
The narrow base of property transfer taxes places a larger burden on a small share of the population relative to broader based taxes.
Real Estate transfer taxes are discriminatory because they are assessed against one type of asset - real estate - while similar taxes are rarely applied to financial assets, such as stocks and bonds.
A household that moves frequently, for whatever reason, does not derive additional benefits or place additional burdens on public services (except for minimal administrative costs) as compared to someone who does not move, and should therefore pay similar taxes.
Transfer taxes are more volatile than one might suspect.
Increased closing costs on the transfer of existing residential property are likely to reduce the ability of new and current homebuyers to purchase a home.
A real estate transfer tax in excess of the costs associated with the administration of property-ownership records is an arbitrary levy that is neither systematically related to household's ability to pay nor to the benefits that movers derive from public services.
Using the proposed increase in the real estate transfer tax on a home selling for $150,000 the increase in tax would be an additional $420, on a home of $250,000 it would be an additional $700, at $350,000 another $980, and $1260 for a home sold for $450,000. If a couple retires to the beach, selling a house up state, they will be hit twice with the increase in real estate transfer tax.STATUS:
HB 293, legislation raising the realty transfer tax by .28%, was introduced on January 17th by Representative Lofink (R-Caravel Farms) and sponsored by Senator Venables (D-Laurel) and referred to the House Education Committee. Dr. George gave testimony before the Joint Finance Committee on February 6th and before the Bond Bill Committee just last week outlining DTCC's capital construction needs.ACTION:
Tell your legislator that you are opposed to any increase in the real estate transfer tax and ask for their opposition to any proposed increase.