 My seven-year-old son recently read a story about a king who decided to tax sensible behavior. As a result, everyone in his kingdom starting acting silly. People wore pajamas to work, dressed up in bunny costumes, and trains ran backwards. My son thought the story was funny, and so did I. But sometimes when stories become real, they are not so funny anymore.
Some policymakers are proposing taxing sensible behavior in the form of real estate ownership and home purchases. Virtually everyone in the United States agrees that homeownership and real property ownership promote good community values. Speaking as a former tenant and a current homeowner, I know that I began to pay a lot more attention to my neighborhood and my community once I bought my home. Unfortunately, policymakers who propose taxing homeownership and property ownership are unwittingly pushing America away from the sensible path of real estate investment and the resulting positive benefits to our society – and into the silly path of disinvestment.
Some of the ideas that have been proposed by policymakers in Texas include a real estate transfer tax, a tax on real estate services, and an increase in fees that real estate practitioners pay to the state. All of these proposals would result in higher costs to real estate consumers, thus depressing homeownership and real estate investment.
The 70,000-member Texas Association of REALTORS® opposes increasing taxes on homeownership and real property ownership because it’s bad economic policy. Of course, it would hurt real estate professionals. But the issue goes much deeper. |
Increases in real estate taxes would prevent many Texans from achieving their dreams of homeownership, create a downturn in the real estate market, result in lost jobs, and have a chilling effect on consumer spending. And the benefits to the state are non-existent. For example, a real estate transfer tax, a tax on real estate services, or increasing professional fees would not generate enough revenue to fund Texas schools, so other taxes would still have to be assessed. Real estate has been a constant, positive contributor to Texas’ economy. Increasing real estate taxes would undermine that.
The Real Estate Center at Texas A&M University published a study in November 2004, titled: Analysis of a potential transactions tax for financing education in Texas. This study concluded that the creation of a transfer tax on real estate would result in $955.5 million in foregone economic activity and 11,575 Texas jobs eliminated. Another property-tax study by the National Association of REALTORS® assumed a tax rate of 0.5% and an average $125,000 home purchase price. Based on these assumptions, homebuyers would need to pay $600 more at closing – and home sales in Texas would decline by at least 2.7%. Some Texas legislators are contemplating a tax rate three times higher than this scenario. It’s reasonable to assume that a 1.5% transfer tax would cost homebuyers a lot more than the $600 figure at 0.5%. A transfer tax at this rate would cost homebuyers at least $1,875 in additional money at the closing table, and would prevent many Texans from buying a home of their own.
We couldn’t agree more that the Legislature has to take action to equitably fund our public schools. However, replacing one property tax for another, like with a real estate transfer tax or tax on real estate services, is simply taxing sensible behavior with silly results. Any tax changes by the Legislature should encourage Texans to invest in their families and future, not make the barriers to homeownership even higher.
|
