THE BAD IDEAS
Real Estate Transfer Tax: Bad for consumers, bad for Texas
One possible approach to school funding is a transfer tax on real estate. As you might expect, those of us in the real estate business in Texas oppose a real estate transfer tax because it would discourage home sales, hurting our livelihood. True, it would. But the issue goes much deeper.
A real estate transfer tax would prevent thousands of Texas families from achieving the American Dream of homeownership. It would also make it much more difficult for those who need to sell their homes someday. And finally, it would hurt the Texas economy.
The Real Estate Center at Texas A&M University published a new 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. Right now, Texas is one of the most desirable states for businesses to invest in and relocate to. A real estate tax would change that. Surely this isn’t what our leadership at the Capitol wants.
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%.
We hear that some Texas legislators are contemplating a tax rate three times higher than this scenario. A 1.5% transfer tax would cost homebuyers a lot more than the $600 figure at 0.5%. A transfer tax of 1.5% would cost homebuyers $2,466 in additional money at the closing table when purchasing the average-priced home in Texas – and have a chilling effect on home sales statewide. Real estate transfer taxes cannot be rolled into a mortgage loan and they’re not tax-deductible.
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