Why the land transfer tax, also known as the "Home Tax" is a bad idea.
A land transfer tax is a tax that is paid every time real estate is sold. The tax is a certain percentage of the value of the property. Following is a detailed list of facts about the transfer tax:
Land transfer taxes (home taxes) have a definite downside: The North Carolina Association of Realtors has a white paper policy report that documents the downside to real estate transfer taxes now collected in six counties across the state. Click here to download the report.
Equity is stripped from the seller. Because transfer taxes are paid by the seller, part of the equity that the homeowner acquired in the property is taken away. This equity is important to apply to the purchase of the next home, sending children to college, saving for retirement or starting a small business. The Home Tax hurts everyone-from the elderly couple who is counting on the equity from the sale of their home to pay for retirement or an alternative living arrangement to the young couple selling their starter home and looking for a bigger house for a growing family. Owning a home is the result of hard work, personal responsibility and sacrifices. There shouldn't be a tax for the privilege of selling your own property.
Transfer taxes are unfair. This type of housing tax is discriminatory because it is assessed against only one type of asset - real estate. A household that moves frequently, for whatever reason, does not derive additional benefits or place additional burdens on infrastructure as compared to a household that does not move at all.
The Home Tax is regressive. People with lower incomes spend a larger percentage of their income on housing than people who have higher incomes. Therefore transfer taxes impose a higher tax burden on lower income households.
Entry-level and all other homes become less affordable. A transfer tax has a negative impact on housing costs and reduces housing opportunities across the income spectrum. Affordability is already an acute p
roblem in North Carolina and a new Home Tax would only make that problem worse.
Negative effect on our economy. The higher cost of housing resulting from a new Home Tax would hurt our economy and make our area less attractive for business. The availability of quality affordable housing is a very important factor for business recruitment.
Revenues are unreliable. Revenues generated by transfer taxes are largely dependent upon economic cycles, and thus will fluctuate over time. This makes it difficult to use those revenues to fund bond issues or to cash flow infrastructure development projects, as opposed to revenues generated by property taxes or sales tax. Even extremely high transfer taxes could not come close to meeting most communities' needs for infrastructure development, and thus bond issues would continue to be necessary. This dual funding scheme has the potential for eroding public accountability and understanding of infrastructure funding requirements, which could further diminish support for bonds in the future.
Learn more about how citizens stopped the Home Tax across North Carolina.