The budget that Gov. Mike Easley signed into law last week gave the counties the right to assess up to a 0.4 percent tax on real estate sales. But before the new tax can be levied, the law requires counties to hold a voter referendum. These referendums will be the new battlegrounds in the transfer tax fight.
That's the word from Tim Kent, N.C. Association of Realtors head honcho. He told me Realtors are going to fight the transfer tax county by county, a strategy they've been forced to adopt.
The Realtors hoped to kill the transfer tax at the state level and spent north of $700,000 trying to convince legislators that the levy is a bad idea. That didn't happen.
I fully expected Kent to be licking his wounds when I tracked him down. Far from it, he sounded like John Paul Jones.
"The statewide campaign was Step 1," Kent said. "Step 2 is to be engaged at the local level, and we're going to be ready to operate by this fall."
Kent's brigades will need to be ready. In November, Washington County commissioners will ask voters for a 1 percent tax. That county is one of seven jurisdictions that had pre-existing General Assembly authority to levy a transfer tax.
Brunswick, Durham and Union county commissioners are also pondering a November referendum, but they can ask only for a 0.4 percent tax. Kent regards the lower rate as a victory. Nearly all transfer tax bills introduced early in the session called for a full 1 percent.
"A statewide 1 percent transfer tax rate would have had an impact of up to $720 million [annually] on taxpayers," Kent said. "The 0.4 percent rate will result in $250 million. We think our campaign reduced taxpayer impact significantly." The N.C. Association of County Commissioners estimates the 0.4 percent rate will generate $311 million.
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KENT WASN'T BRAGGING, BUT HE COULD HAVE. Before the Realtors waded into this fight, the transfer tax debate was the domain of government geeks. By renaming it the "Home Tax" in smartly produced ads, the Realtors made their arguments understandable in the public arena. If there was any doubt, their Web site, www.itsabadidea.org., made it crystal clear. This was pretty good stuff.
If public opinion is a guide, the campaign worked. The Realtors produced a poll in late July that showed 77 percent of North Carolinians opposed to the new tax. More telling is the fact that legislators avoided a thorough debate and hearings by burying the transfer tax authorization in the 321-page budget bill.
If the Realtors bring the type of campaign they ran at the state level to the local referendums, county commissioners are in for a tough time. Not only because the Realtors are formidable, but because the transfer tax is fundamentally flawed, unfair and intellectually dishonest.
Supporters told legislators the tax is needed to pay for growth, a legitimate concern in most North Carolina counties. But this tax doesn't do that. The $800 derived from the sale of a $200,000 home can just as easily be spent on new carpet for a commissioner's office as it can for buying school desks.
The transfer tax is grossly unfair because it taxes the wrong people. It makes no sense to impose a growth tax on people who are leaving or moving within the county. These folks aren't straining county services. Yet that's exactly who this tax hits.
The reality is, newcomers make up only 12 percent of real estate transfers in any given year, wrote Pat Riley of the Allen Tate Co. in the Charlotte Observer last week.
There are only two fair ways to pay for growth. First, redirect spending on non-core government functions into new schools, infrastructure and public safety. Second, raise property taxes so nearly every citizen pays for growth, not just a targeted few.
These methods are also the most effective. The truth is, transfer taxes and impact fees don't pay for real growth. They're simply gimmicks used to fund the growth of government.