NC's land transfer tax headed for repeal

In 2007, the General Assembly gave counties the power to levy a 0.4% tax on real-estate transactions, if county voters approved the tax in a referendum. So far, counties have struck out in 24 out of 24 attempts. Now realtors and some lawmakers say the time has come to take the option back.

The bill’s sponsor, Rep. Julia Howard, R-Davie, is a realtor herself. She says the transfer tax is really a tax on equity, since the seller ends up paying it. “As a realtor, I can truly tell you that the tax does discourage home ownership. It’s regressive, and it’s certainly an unreliable tax.”

Howard told the committee that the only thing the transfer tax option has accomplished so far is the expenditure of a lot of advertising money. “A county decides they’re going to put it on the ballot, and the industry is going to come in and spend a lot of money, a lot of time, a lot of effort to defeat the initiative. And the county is going to spend a lot of tax dollars to promote the issue.”

“Let’s take it off the table and not have it come up again year after year after year,” Howard said. “It’s a loser.”

But county officials don’t want to give up the right to try again. Rebecca Troutman with the North Carolina Association of County Commissioners testified that, in the six northeastern counties that have had transfer taxes for 20 years, home sales haven’t been hurt, and property taxes have gone down.

“Opponents will label this the home tax, implying it is an annual tax on homes. Nothing could be more misleading. The property tax is the real home tax,” Troutman said. “H92 would take away the right of the voters to decide for themselves what taxing structure works best for their communities.”

But repeal supporter Rep. Paul Stam, R-Wake, said voters have already decided – county officials just don’t want to hear it. “If they were listening to their people, they would discover after 24 defeats that the people don’t want it.”

Rep. Paul Luebke, D-Durham, said it would be a “terrible mistake” to repeal the tax option. “Other than some vested interests, primarily the Realtors’ association, I can’t understand why we would take away local control.”

Luebke chalked up the transfer tax’s poor track record so far to sophisticated PR campaigns by the NC Association of Realtors, campaigns county officials couldn’t match. But he says recent ballot measures have been much closer votes. “Proponents are getting good at presenting their argument,” he said. “Allow that public debate to continue.”

House Finance didn't agree. H92 passed with only five "no" votes, as far as I could see. It’s scheduled for a full House vote on Monday night.