Wednesday, October 11, 2006

Property transfer tax.... yuck

Just found this article from Santa Fe New Mexico where they are proposing a transfer tax to help support affordable housing. I know this sounds like feel good legislation. Who wouldn't want to be involved in artificially lowering housing prices?? Please.

Under the proposal, a 1-percent levy would be assessed on that portion of a real-estate transfer in excess of $319,000. For example, a transfer tax of $810 would be assessed on the sale of a $400,000 home.

The threshold -- which might be changed as the idea is debated -- is intended to avoid adding more costs to property in a lower price range. The median price for home sales in the city reported by the Santa Fe Association of Realtors during the second quarter of this year was $352,000.
(Emphasis mine)

I guarantee you that the threshold will be played with before and after a real estate transfer tax is implemented.

My bigger beef is that a transfer tax once imposed becomes the target for other sources looking for government funding. Transfer taxes are easier to raise than some others because a very small portion of the population at any one time is buying or selling real estate at any and all moments.

These kinds of taxes simply need to be fought tooth and nail. Our state Association, AAR, fought a state transfer tax some years back that the then new governor wanted to impose on the entire state. A transfer tax is bad for private property owners because it artificially raises the cost of buying and selling property.

Full disclosure... this is also bad for the real estate business, I have no problem admitting it. Sellers will likely seek relief from this tax from the cost of a real estate agents services. I'm willing to always negotiate with a seller or a buyer for the cost of my fees, but I'll have a hard time doing it on behalf of the government. A government that is probably less responsible with public funds than I am with my own funds.

I encourage the real estate practictioners of Santa Fe to fight this transfer tax proposal.

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