I get an email from the Texas Real Estate Political Action Committee (TREPAC) this afternoon about three proposed bills in the Texas Legislature that would allow counties to impose a real estate transfer tax to raise money for transportation projects. Needless to say, TREPAC is slightly biased in its view about these proposals so I decided to find out for myself. I read all three proposed bills, SB-950, SB-934, SB-942, arguments pro and con.
This idea stinks!
The only somewhat valid argument for a real estate transfer tax is that it can help keep property taxes under control. Newsflash: Texas already has the highest property tax rates in the country averaging around 2.5%. In comparison, Washington DC which has a real estate transfer tax of 1.1% has property tax rates of 1.3%. Not to mention that this proposal has fund raising as it primary purpose, not lowering property taxes.
The proposed bills in our Legislature leave it up to counties to set the rate but most estimates range from 0.5-1.5% of the transaction price. In some cases, this would increase the closing costs for buyers by thousands of dollars and edge them out of the market. This would result in stifled activity for the housing market and the six percent of the US economy it represents.