Some members of the N.C. Senate appear to be on the verge of caving in to the real estate lobby and taking away the right of county voters to raise local land transfer taxes. Those in favor of repealing counties' option to impose a higher land transfer tax have concluded that because voters so far have declined to approve the tax, that option shouldn't exist at all.
That's dumb. Here's why: Last year the legislature approved a bill giving counties the ability to put the land transfer tax – collected when property is sold – or an additional 1/4-cent sales tax on the ballot for voter approval if they need more revenue to meet local services. That was part of a complicated deal involving the state's taking over the counties' share of Medicaid costs, and the state's taking away half a cent of local sales taxes to help pay the state's additional Medicaid costs.
To now repeal the transfer tax option would not only put the legislature in the position of bowing to well-financed lobbyists and reneging on an arrangement with local governments. It also would deprive counties of one option for funding more local services if voters wanted to do it that way. The ultimate effect would be to force counties to raise either local property taxes or sales taxes.
Sen. David Hoyle, chairman of the Senate Finance Committee, notes that transfer tax proposals so far have been rejected by voters in 20 counties. “Babe Ruth would not be happy with this record. They all struck out,” said Sen. Hoyle.
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That analogy is a bad one. Babe Ruth was one of the most successful hitters of all time, but he also struck out a lot – 1,330 times. That didn't make him quit the game in frustration. He made up for those strikeouts with a lot of timely hits – a total of 2,874, to be precise, including 714 home runs.
The fact that the voters have rejected the transfer tax doesn't mean the law isn't working. It may mean the law is working very well, in that it requires a countywide referendum and local officials have failed to persuade voters that the money is needed or the transfer tax is the right way to raise it.
But as counties continue to grow and the list of local needs grows, too, voters may decide they'd prefer a higher transfer tax rather than an increase in property or sales taxes. That's a choice the legislature promised the counties. There's no reason to take it away.
The House is unlikely to repeal the transfer tax option so soon after its passage. That's wise. Voters may not raise transfer taxes for years, or may never do so. But there's no reason to remove it as a local option. It provides the voters closest to county needs another means of meeting them. And the Senate won't look foolish for trying to take away a fiscal tool local governments have only recently had a chance to consider.
Leave the transfer tax alone.