RISMEDIA, March 12, 2009-The Texas Association of Realtors wants homeowners to know several troubling proposals are circulating at the Texas Capitol. They include bills that propose implementing a sales tax on real estate, known as a real estate transfer tax. These proposals would substantially increase the costs of homeownership at the worst possible time.
“I don’t think you have to tell any homeowner that now is not the time to increase the costs associated with real estate, so we’re very surprised to see these proposals this legislative session,” said Brooke Hunt, chairman of the Texas Association of Realtors. “As a state, we only rank 42nd in homeownership, but have made slow and steady progress in recent years. Legislation that shuts out even more Texas families from the American dream of homeownership would be incredibly short-sighted.”
Although several bills have been filed in the 81st session of the Texas Legislature that propose new sales taxes on real estate – including Senate bills 950 and 934 – Hunt said perhaps the most dangerous is SB 942, which allows counties to enact new taxes to increase revenue for local transportation projects.
One of the new-tax options that would be made available to counties is a real estate transfer tax to be paid to the county within 30 days of the transfer of property. The bill allows the county to set the rate of the transfer tax.
The National Association of Realtors commissioned a study to analyze the effects of a transfer tax on real estate. The report assumed a tax rate of 0.5% and a $125,000 purchase price. Based on these assumptions, the cost of buying a home would increase by about $600 and home sales would decline by almost 3%. Senate Bill 942, however, allows the county to set the tax rate, so homebuyers could see a larger cost increase and sales could decline more than 3%. Additionally, the Real Estate Center at Texas A&M University concluded that the creation of a transfer tax on real estate may create more problems than it solves, costing the state $955 million in lost economic activity with 11,575 jobs eliminated.
“Texas’ resilient real estate market has helped insulate us from the worst of the economic recession,” Hunt said. “To make sure that doesn’t change, we need to remove obstacles to homeownership, not create even more impediments. Real estate transfer taxes are regressive, hurting low-income Texans the most, and could provide the tipping point to send our Texas economy in the direction of other, less-fortunate states.”
For more information, visit TexasRealEstate.com.