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March 20th, 2009
Beware the legislature

Submitted by AMY DuBOSE
San Marcos Area Board of REALTORS®

The Texas 81st legislative session is in full-swing, and the state legislature is on the hunt for more of your money.

As in past sessions, there are several bills being considered that involve some sort of real estate transfer tax, a type of tax levied on property at the point of sale. You may hear it called a real estate transfer fee, a real estate transfer tax, a real estate excise tax or a sales tax on real estate. Regardless of what term is used, it adds to the cost of homeownership, prices many people out of the real estate market and damages the economy.

A bad idea

Real estate is a significant contributor to our local, state and national economies; the last thing we need is to slow it down. If you listen to the radio, you may have heard some of my colleagues tell you that the real estate industry and the economy in Texas are healthier than most of the rest of the nation – and that’s still true.

Currently, though, Texas ranks just 42nd out of 50 states for homeownership – and that’s with no sales tax on transactions. Increasing the cost of buying at this point is a risky move for homeownership in Texas.

Bottom line? We should be working toward removing obstacles to homeownership, not adding more.


The housing provisions of the American Reinvestment and Recovery Act of 2009, barely a month old, allow for an $8,000 tax credit for first-time homebuyers. The credit is, of course, designed to lighten the burden for these buyers. As such, anything that makes homeownership less attainable, such as a transfer tax, just seems counter-productive.

Additionally, real estate transfer taxes are highly regressive, meaning higher burdens for lower-income people. Growing families, seniors/retirees, first-time homebuyers, transferred employees and military would also be heavily affected.

What if?

So what happens if a real estate transfer tax passes? Who pays? Who’s affected? Well, if a home seller pays a percentage of his proceeds from a sale, he will either realize less profit on the sale of his home or be forced to adjust his sales price upward, thereby burdening the buyer.

We need money

Running anything – a city, county, state, or other entity, takes financial resources. To support programs or infrastructure, officials are always on the lookout for new streams of revenue. In many eyes, real estate appears to be the easiest and most effective way to generate income.

But instituting a transfer tax on real estate sales is short-sighted. As I’ve already pointed out, it discourages sales and “moving up” to a larger or nicer home.

Additionally, the tax is an unreliable revenue stream. If sales drop, the money slows down and that revenue must be recovered. So guess what? Something else gets taxed.

Plus, let’s be honest –  we know that once a tax like this is in place, it’s not likely to ever go down – only up. Sure, it may start at 0.5 percent of sales price, but it could soon be 2.25 percent.

The money such a tax may initially generate would have far greater negative impact on the real estate industry and the economy.

What can we do?

Texas Realtors advocate for private-property rights, consumer protection, attainable and sustainable home ownership and the overall health of the real estate industry. The issue of real estate transfer tax clearly falls into at least three of those four areas.

Many Texas Realtors are getting involved. In fact, more than a thousand of us are traveling to Austin at the end of March to meet with legislators and express our concerns about transfer taxes and other issues that affect the real estate industry.

If you have any questions about buying, selling or leasing property in the Lone Star State, I encourage you to visit or contact a Texas Realtor.

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0 thoughts on “Beware the legislature

  1. I am in no way endorsing this tax. However, we have just gone through a period when we tried to get get everyone into home ownership. Many peaple who probably should not have been home owners attempted to become hown owners through sup-prime and exotic mortgages. This caused a housing bubble in many parts of the country. Tnis bubble has now collapsed, and that is a big reason why we are in the economic mess we are in. We would have been better off if over the past number of years there had been more obsticles to home ownership.

  2. Larry,
    Obstacles to home ownership should be real ones not ones that line the county or state’s coffers. While it may make more money available for court appointed attorneys the idea of another tax is simply stupid. The obstacle should be a credit rating or a revenue neutral one.

  3. Very good commentary on what is happening both in real estate and in the legislature.

    Instead of doing the job they were voted-in to do, which is to make our lives easier and to work for the [Texas] community good, often they make our lives more complicated and costly.

    Only extensive pressure from voters will guide lawmakers to do the right thing.

  4. Thanks to you all for your comments. I hope that you will contact your representatives to voice your concerns on such a tax as this. The San Marcos Area Board of REALTORS, along with REALTORS from across the state, will attend Hill Visits on March 31 to voice our concerns on this and other hot topic items going on at Capital Hill right now. Our last Hill Visit in 2006 drew nearly 3000 REALTORS to visit with the legislators. Thanks again!

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