One other, less welcome, response to rising property taxes from some elected officials has been to bury the heavier burdens elsewhere. The revenue-raiser of choice is the secretive real estate transfer tax, which usually hits both the buyer and seller of a piece of property with a large bill, based on the property’s value.
Pennsylvania, for example, charges a flat 1 percent on the state level, and localities get an additional 1 percent. On the average Pennsylvania home, this amounts to $3,670–and it is twice that amount in Philadelphia and Pittsburgh. A proposal from Gov. Ed Rendell (D) earlier this year would have raised the state’s “share” of the tax by 50 percent, in order to bail out mass transit systems in Philadelphia and other areas.
Rendell’s plan has since been shelved, but it was not defeated outright. Commonwealth Department of Revenue statistics have confirmed that through the month of May, real estate transfer tax revenues were already running $69.5 million ahead of projections.
New Jersey and New York have “progressive” transfer taxes–the rates climb with the sale price of the home.
Lack of Accountability Crucial
National Taxpayers Union (NTU) President John Berthoud says real estate transfer taxes are “especially insidious because they can be levied at very little political risk to those proposing them. In most cases, neither the homebuyers nor the homesellers are able to vote in the jurisdiction that’s tapping both of their wallets. This lack of accountability is a politician’s dream and a taxpayer’s nightmare.”
In Pennsylvania and elsewhere, the threat from these levies is increasing. Other states that are considering adopting or raising transfer taxes include Connecticut, Maine, New Jersey, Ohio, Tennessee, and Washington.
Even localities have gotten into the act. In June, the Ketchum, Idaho city administrator proposed creation of a real estate transfer tax to help fund a “Regional Transit Authority” among several cities in the Wood River Valley area. Such a tax would require approval from a skeptical state legislature.
So serious has this trend become that NTU recently formed United Homeowners, a coalition designed to give voice to the millions of homeowners, buyers, and sellers who work hard to protect their investment. NTU and its partners–the Commonwealth Foundation, Lincoln Institute, Americans for Tax Reform, Citizens Against Government Waste, and the American Association of Small Property Owners–have organized a Web site at http://www.unitedhomeowners.info to help taxpayers stay informed of developments in their own states and take action against tax hikes.
— Pete Sepp