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NPT Biz: Realtor update; ‘no’ on real estate transfer taxes

Some news from the Texas Association of REALTORS® (El Pasoan Michael Bray is regional vice president):

Just one of dozens or scores of El Pasoans engaged in battle at the Texas Legislature, which will pass laws that affect folks by the thousands and millions:

Real estate transfer tax proposals take center stage

Last week’s Legislative Liaison discussed SB 942, filed by Sen. Jeff Wentworth of San Antonio, which would give counties the ability to impose a real estate transfer at a rate to be determined by the county to pay for transportation needs. However, there are other proposals that include a real estate transfer tax being considered.

One proposal would use a transfer tax to benefit the state’s Housing Trust Fund, established in 1991 to create affordable housing for low-income individuals and families. Last session, the Legislature almost doubled the program’s funding to about $5.8 million per year. Advocates for this transfer-tax proposal claim that the tax would bring in an additional $40 million per year. Another proposal that hasn’t been filed introduces a real estate transfer tax to fund legal defense services for indigent citizens.

81st Texas Legislature
Issue 8: March 3, 2009

Legislative fact
Did you know that March 2 is Texas Independence Day? On March 1, 1836, after a five-month battle, Texans called a meeting known as the Convention of 1836 to discuss officially declaring independence from Mexico. It is believed that a draft of this declaration of independence had already been prepared, as it took only one day for the delegates to adopt the Texas Declaration of Independence. Numerous grievances listed in the document explained Texans’ desire to remove themselves from Mexican control: Mexico had become a military dictatorship under Antonio López de Santa Anna and had become a weak, tyrannical, and corrupt government; freedom of religion, public education, and basic rights such as the right to bear arms and have a trial by jury were denied to Texans; and Texas was being neglected by the regional government in Coahuila. The Texas Revolution lasted until April 21 when General Sam Houston led Texas to victory in the 18-minute Battle of San Jacinto. Santa Anna was soon captured and the war ended.

Texas Association of REALTORS® update

Real estate transfer tax proposals take center stage
Last week’s Legislative Liaison discussed SB 942, filed by Sen. Jeff Wentworth of San Antonio, which would give counties the ability to impose a real estate transfer at a rate to be determined by the county to pay for transportation needs. However, there are other proposals that include a real estate transfer tax being considered.

One proposal would use a transfer tax to benefit the state’s Housing Trust Fund, established in 1991 to create affordable housing for low-income individuals and families. Last session, the Legislature almost doubled the program’s funding to about $5.8 million per year. Advocates for this transfer-tax proposal claim that the tax would bring in an additional $40 million per year. Another proposal that hasn’t been filed introduces a real estate transfer tax to fund legal defense services for indigent citizens.

Here are some facts about real estate transfer taxes and why the Texas Association of REALTORS® opposes their use:

What is a real estate transfer tax? A real estate transfer tax is a tax assessed when ownership of property is transferred from one party to another. Some states also assess such a tax on long-term leases. This type of tax typically comes in the form of a percentage of the value of the property but can also be a set fee on the transfer of property. State and local regulations may dictate whether the buyer or the seller is responsible for paying the tax. State laws can also authorize local jurisdictions (cities and counties) to impose a real estate transfer tax in lieu of or, in many cases, on top of a state-imposed transfer tax. Texas is one of 11 states in the U.S. without a real estate transfer tax at the state or local level.

Our position on real estate transfer taxes: The Texas Association of REALTORS® opposes efforts to create a transfer tax on real estate. Real estate transfer taxes and fees are an unnecessary burden to buyers and sellers and negatively affect housing costs and economic development. Because of their volatility, these taxes are a poor revenue source for governments. The Texas Association of REALTORS® will vehemently fight any and all real estate transfer tax proposals before the Texas Legislature. With the national economy at a low point and the Texas economy in a downturn, it’s inappropriate to discuss adding a burden to Texans that will take buyers out of the market and have a negative effect on the state economy.

Why not a real estate 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%. Keep in mind that the average home price in Texas is $166,400, according to the Real Estate Center at Texas A&M University, and recent transfer tax proposals have mentioned rates of 1% or 2%.

Another National Association of REALTORS® study in 2008 analyzed the effect of a theoretical 1% transfer tax in Texas. Because market distortions resulting from a transfer tax include avoidance of the taxed activity, resulting in fewer transfers (sales of property) and decreased mobility, NAR estimates that 35,886 households in Texas would be unable to buy houses because of the transfer tax.

Real estate transfer taxes are discriminatory because they are assessed against one type of asset and place a larger burden on a small share of the population relative to broader based taxes. Further, real estate transfer taxes are regressive because the tax burden relative to income is greater on lower income people compared to higher income people.

In addition, 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.

Legislative Hill Visits on March 31
Show the strength of Texas Association REALTORS® by coming to Austin on March 31 for the Legislative Hill Visits. The real estate transfer tax will be high on the agenda when you meet with your state representatives and senators. Between now and March 31, the Legislative Liaison will update you on all of the issues that will be addressed at the Hill Visits along with the current progress of these bills. Grassroots involvement is more important than ever this year, as Speaker Straus looks to House members to drive policy debate. The Legislative Hill Visits mark a tremendous opportunity for Texas REALTORS® to support private-property rights and fight for a strong real estate industry. Contact your local association to attend.

National Association of REALTORS® update

Mortgage interest deduction in jeopardy?
On February 26, President Obama released his budget proposal with further hopes of helping our faltering economy. Unfortunately, one portion of this proposal could ultimately serve to be a major impediment to the recovery of the housing market: changes to mortgage interest deduction (MID). The National Association of REALTORS® is strongly opposed to any modification of the MID. No legislation has yet been filed; however, the administration’s thinking has been revealed. As currently drafted, the plan changes the MID by reducing the amount of mortgage deductibility on families earning over $250,000. This proposed change in the MID will result in further erosion of home prices and home values. If this sort of proposal is enacted it will set off a new round of price depreciation and will cause greater distress on the balance sheets of banks as the collateral value of mortgage backed securities declines. A second credit crisis could emerge before the first one is resolved. The National Association of REALTORS® is launching a multiphase plan of action to eliminate this provision from the budget plan.

The members of the Texas Association of REALTORS® play a key role in protecting the future of the real estate industry through grassroots efforts and investments in TREPAC. See how much money TREPAC has saved you by using the new TREPAC calculator.

Rest assured, the Texas Association of REALTORS® is fighting hard for REALTORS® across Texas to ensure that fair and equitable public policies are implemented to protect you. The Texas Association of REALTORS® will continue to fight to make sure every citizen in Texas can realize the American Dream of homeownership.

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Written by newspapertreeelpaso

March 5, 2009 at 9:47 am

Posted in Uncategorized

5 Responses

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  1. At the rate we are being taxed, we will all need low income housing and free legal services and have to stay off the roads.

    Dont these people realize there is a recession and this is the wrong time to start raising or creating taxes. This will be an additional burden on people that are trying to buy or sell houses. How will this help with the housing crisis?

    Rey

    March 5, 2009 at 10:22 am

  2. I’m growing weary of reading your stories and encountering so many obvious grammatical and spelling errors. The real estate story is the latest..Come on, guys, you are supposed to be professional journalists. Bet you can’t find the error. “Just one of dozens or scores of El Pasoans engaged in battle…” I think it should read “dozens of (not “or”) scores of El Pasoans”.
    I find errors almost every time I read your stories! Beef up on your proofreading!!

    Debbie Torres

    March 5, 2009 at 12:56 pm

  3. Debbie, thanks for reading. Please, don’t weary! I hate making errors, just as you hate reading them. This wasn’t one. “Just one of dozens or scores of El Pasoans” … it’s as if I were using numerals and had written “just one of 21 or so El Pasoans.” Dozens of scores would be hundreds or thousands, and then I would have written: “Just one of the hundreds or thousands of El Pasoans.”

    Sito Negron

    epmediagroup

    March 5, 2009 at 2:12 pm

  4. Just for sake of credibility, does this organization ever list examples of policies they have supported that, while detrimental to realtors, provide public benefits that more than compensate?

    Bet it’s a real short list.

    tanker

    March 5, 2009 at 4:57 pm

  5. Sito, don’t fret, we get the point of the piece and although we dont always agree, I will continue to read.

    Rey

    March 5, 2009 at 5:25 pm


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