Mecklenburg County Commission Chair Jennifer Roberts squared backed taxing Martians in her 2007 State of the County address.
Said Roberts:
For this term, it is my goal to try to avoid property tax increases. I look forward to working with our state delegation and the state legislature as they tackle the sensitive issue of tax reform. Specifically, Mecklenburg County will be seeking ways to provide future tax relief to property owners, who now shoulder too much of the burden. … In the future we may have the option for other revenues, whether it be impact fees, real estate transfer fees, or state bonds ….
Thus Roberts identifies a mythical class of property owner every bit as fictional as Martians: Property owners who would not feel the bite of impact fees or real estate transfer taxes. Oh, sure on the county budget line item the revenue from those sources would be apart from the property tax line. But Roberts is too smart to confuse a government budget with reality.
In the real world, taxes on real estate — on property values, on property transactions, on property development — are paid by the end-user of said property. The owners. Also known as property owners. The very people Roberts is worried about.
Taxes on real estate make real estate more expensive to buy. There is no magic to this. Impact fees provide the illusion of sticking it to Evil Developers, but in reality developers just pass the tax along to buyers of new homes, either by raising prices or deleting features. So instead of getting the granite counter-tops you wanted, you get to pay Mecklenburg County more money up-front.
“Aha!,” some might think. “I’m not buying a new anytime house, let’s stick to those new folks! Keep my property taxes low!”
Doesn’t work that way. Impact fees raise the cost of housing, somebody pays the tax. This increase shows up in property valuations sooner or later. The upshot is that existing home owners see their property tax bills inflated by the impact fees on new construction. In this way impact fees can be seen as a future surcharge on property taxes.
Because impact fees only hit new construction, some say that is not fair. Up pops the transfer tax concept, which is a direct sales tax on real estate, old and new. In many locales it is the custom for buyer and seller to split the payment of the tax at closing. This means that each party will have to come up with several thousand dollars more to make a real estate deal happen.
How this is not a tax on property owners escapes me. Plus, like impact fees, the added cost of transfer taxes is eventually reflected in property tax bills. Government cannot make something more expensive and then pretend it is not really more expensive.
But here is the dangerous part: Roberts is betting that demand for real estate in Mecklenburg County will remain so strong that buyers will keep coming even as government increases the price of real estate. However, at some point — and I do not know it and neither does Roberts or any member of officialdom — potential buyers look at the cost of living in Mecklenburg and say,”It is not worth it.”
It is not worth the price they pay for the services they get. So they stop buying. There are still sellers, however. What happens? Property values begin to fall. That is the tipping point no one wants to see.
Yet, here we are starting off 2007 with a bunch of code words for increasing the cost of living in Mecklenburg, pretending that we are not marching straight towards that tipping point were people say, “It’s not worth it.”
Wonder what it is like on Mars?
