REALTORS® Oppose Governor’s Tax on Homes

 Michael Theo  |    March 09, 2007

Gov. 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.
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