It looks like pressure from the state’s realtors has helped to slow the rush to adopt a land transfer tax in Raleigh.
The thing that fascinates me is the continued description of the tax as falling on sellers of real estate. Let’s think about this.
The proposed tax — it started out as a 1% levy on the value of a sale and has mutated several times at different rates — is a transaction tax. The transaction is the taxable event. In this regard it is identical to a retail sales tax. Retailers must collect the tax on their transactions. But it is the buyers who have to cough up the added cash. Retailers do not eat the tax.
The same will happen with a transaction tax on real estate. Sellers will have to deal with the compliance cost of the tax, making sure the money gets to the state. But just because they will hand the money over to the revenuers do not assume they have paid the tax.
There is no way to avoid this. Sellers will not absorb the tax. They will raise prices to recover the tax if the state tries to prohibit a transfer tax “breakout” on closing docs, a loony idea that sounds exactly like something the General Assembly would try.
As a result, one way or another, a transaction tax on home sales will increase the cost of homes in the state. And in order to send yet more revenue to Raleigh.
Hands up who thinks that is a good idea?
