Raise the state transfer tax?

Published 8:50 am Monday, July 7, 2008

By Staff
The workings of the North Carolina General Assembly so often resemble old adages. The two that most accurately describe the recent negotiations on the budget and other tax bills are “You get what you pay for” and “You got to dance with them what brung ya.” Witness the recent debate on the Senate floor about whether or not to repeal the authority given to counties last year to levy a 0.4 percent real transfer tax if approved by voters.
The debate over the bill, which ultimately passed overwhelmingly on the Senate floor, went mostly as expected. Senator David Hoyle, the bill’s primary sponsor, said that “people” don’t want this hanging over their heads. By “people” he seems to be referring to the state’s Association of Realtors who has been spending lots of money to fight local transfer tax referenda. The realtors also recently announced a special fund of $10 million to continue these fights and presumably, also to challenge legislators who support the local taxing authority.
The bill also had detractors. Senator Charlie Dannelly spoke about the need to keep the commitment made to counties when the Medicaid-for-sales-tax swap was made last year. Senator Ellie Kinnaird gave a persuasive speech about how the counties that have had the transfer tax in place for several years have kept their property tax rates down and have had strong growth in property values.
Perhaps the most logical argument put forward during the debate was from Senator Dan Clodfelter. He voted with the majority in favor of repealing the local authority, but his reason for doing so was that the state itself needs to retain the authority to increase the real estate transfer tax. Not many people realize that the state already does levy a small tax on real estate transfers. He pointed out that raising the state transfer tax might be appropriate in the near future in light of some of the infrastructure demands the state is facing such as road construction and maintenance costs.
This is a very rational and compelling argument. But who is he kidding? The state is struggling to maintain the existing local authority to increase this tax — and that is with the requirement that any increases be approved by local voters. What makes the senator think his fellow lawmakers are going to be willing to raise the state transfer tax anytime soon? (Especially with the realtor’s special $10 million “don’t even think about it fund” now in place.)
The state’s current policies with respect to local revenue options are incredibly irrational. Certain counties are already allowed to levy an additional transfer tax — including Dare County, the home of Senate President Pro Tem Marc Basnight, who coincidentally voted in favor of keeping the local option. The counties that already had the authority to establish a local real estate transfer tax can do so without a vote of the people. Similarly, a few other counties have also been given the authority to levy development impact fees — once again without requiring voter approval.
It’s time to get this policy area straight. Give the same options to every county or don’t give it to them at all. And get out of the business of requiring voter approval in some places and not in others. Citizens should vote on taxes when they vote for local elected officials to make smart taxing decisions. Requiring local referenda on taxes turns communities into targets for the realtors’ and developers’ special attack funds when they should be places of serious debate about what policies are in the best interest of the residents of those communities.
But, for now it’s best to assume that realtors know the value of the old adage “You get what you pay for” and legislators know the value of the old saying “You got to dance with them what brung ya.” So don’t expect a rational policy on these matters anytime soon.