The real estate industry tends to
automatically oppose taxes affecting their industry. In fact, the website
of the National Association of Realtors has an entire
section
devoted to RETTs, which includes a long list of links to news stories of
realtors opposing and defeating RETT measures. They typically claim RETTs
will both make housing unaffordable and cause housing markets to stagnate.
Foes like this will rally property owners of all sorts who are afraid of
losing value and local officials who are afraid of discouraging investment.
There are two responses to this. First, the alarmist statements about harming the market have never been proven. Jaimie Ross, who was a real estate attorney before joining 1000 Friends of Florida, calls the assertion of harm "unadulterated ridiculousness," adding "there is not a real estate transaction anywhere-residential or commercial, low price or high-that has not happened because of the documentary stamp tax [Florida's RETT]," she says. "I can say that unequivocally. It is never part of the decision to buy and sell. The only issue is how are [buyer and seller] going to split it."
Winning realtors over necessitates showing them how they will benefit. Using at least some of the money earned for homeownership programs, for example, directly increases their business. In Florida, the realtors' lobbyist recognized the potential of more homebuyers early on, and has been a firm supporter.
In some states, localities must jump through many hoops to pass new local taxes. Some states prohibit local governments from instituting new taxes without state approval, or without a yes vote from an extra-majority of voters (e.g. two-thirds approval). The legality of the tax may also be challenged in some states as an income tax, especially if sellers pay and there are anti-speculation measures. If a RETT is classified as an income tax, it might require voter approval.
When a tax is gradated based on length of time of holding and/or profit received, the administration becomes much more complicated. The agency administering the tax needs to track the dates and prices when properties change hands, assess the value of improvements, and handle exemptions and appeals. This will cost more money and time, and generally makes these sort of measures unappealing to small jurisdictions.
Making the formula for calculating the tax rate as simple as possible, and creating a standardized form used in all closings (to determine which tax rate applies) can make the record-keeping somewhat simpler.
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