Governor Doyle has proposed doubling the current real estate transfer tax in
his state budget – a proposal that would increase taxes on homes in Wisconsin by
over $140 million. While there have been numerous legislative proposals to raise
the transfer tax over the years (all of which have been strongly opposed by the
WRA), none have been proposed by a governor in a budget bill and none have
contemplated such a dramatic tax increase. The WRA is planning an all-out effort
to remove this tax increase from the state budget, and we need your help.
The Facts
The current real estate transfer tax is $3 per $1,000 of value. On a
median-priced home in Wisconsin of $166,000, the tax would total nearly $500.
Under the governor’s plan, the tax would double to $6 per $1,000 of value,
bringing the total tax on the average home to nearly $1,000. While the seller is
responsible for paying this cost, it must be paid in full, at closing, at a time
when both the buyer and the seller incur numerous closing costs. And if the
seller can’t afford that loss of equity, the price of the house is increased and
the buyer is negatively affected through higher prices.
Regardless of who pays, this proposal is a tax on housing, pure and simple.
If passed into law, this whopping tax increase will move Wisconsin from having
the 22nd highest real estate transfer tax in the country to the 12th highest
tax.
Educating and Mobilizing Opposition
The WRA is working hard to amass a large coalition of interests and the
general public to analyze and publicize the adverse impacts of this tax increase
on the American Dream. In the weeks ahead we will send additional information so
that REALTORS® across Wisconsin can effectively engage in this effort in their
own communities and in communicating with their state Senators and Assembly
representatives. As we undertake this broader effort, here are some key talking
points on the issue.
Talking Points Against Raising the “Home Tax”
Raising the real estate transfer tax is raising taxes on homes in
Wisconsin.
The “home tax” hurts buyers and sellers
- The seller is responsible for paying the transfer tax in full, at closing,
at a time when both the buyer and the seller incur numerous closing costs.
- Raising the "home tax" hurts existing homeowners because it’s double
taxation on property owners who pay significant property taxes each year and
then are forced to give part of their equity away in order to create an
opportunity for someone else to buy their home.
- If the seller can’t afford to lose that equity, the price of the house
will increase and that will prevent many Wisconsin families from being able to
afford their American Dream.
- This hurts everyone, from an elderly seller who is counting on the equity
from the sale of his or her home to pay for retirement or an alternative
living arrangement, to the young couple selling their starter home and looking
for a bigger house for a growing family.
The “home tax” hurts housing affordability
- Raising the “home tax” will hurt housing affordability in Wisconsin,
raising the cost of selling and/or buying a home.
- The current “home tax” is $498 on the sale of a median-priced home
($166,000) in Wisconsin. This proposal would double that to a whopping $996.
- The governor’s proposal would move Wisconsin from having the 22nd highest
real estate transfer tax in the nation to the 12th highest.
The “home tax” is unfair
- The governor proposes to use nearly all the additional revenues raised by
this tax increase to help pay for the county court system and Youth Aids
Program, and for the state’s general fund. It is fundamentally unfair to ask
only those few citizens involved in a real estate transaction each year to pay
higher taxes for in-related services everyone uses.
The “home tax” is regressive and discriminatory
- The “home tax” is regressive because it is imposed on home values at a
flat rate. Moderate-income families like teachers, police officers and
firefighters, as well as lower-income families, pay a greater percentage of
their income on housing and thus will suffer most when they go to sell their
home.
The “home tax” is also a business tax
- This tax is applied to all real estate transfers – everything from the
sale of farms to commercial buildings.
- Because it is applied only to real property transfers, the “home tax” is
also a business tax that discriminates against real estate investments, making
real property investments less attractive compared to other financial assets
such as stocks and bonds.
- Wisconsin already has the 8th highest property taxes in the nation.
Increasing real estate taxes even further creates greater disincentives for
business to locate or grow here.
The “home tax” revenues are unreliable
- Revenues from the “home tax” are extremely volatile, fluctuating with real
estate market cycles. Given the current cooling of real estate markets in
Wisconsin, this is a particularly bad time to raise this tax.
- Relying on cyclical funding such as the “home tax” creates future budget
uncertainties and the potential for raising other taxes or cutting future
spending in the event of reduced real estate transactions.
Published: 3/9/2007
