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Transfer Tax Call to Action

6.25.08

Realtors®, this week Massachusetts Association of Realtors® President, Susan Renfrew put out a Call to Action to oppose proposed transfer taxes in Martha's Vineyard and Nantucket, which will likely be heard and voted upon by the State Senate this week (Senate Bills S. 2546 & S.2544). Realtors® strongly oppose real estate transfer taxes as bad tax policy for the following reasons:
  1. Community-wide Responsibility. A community wide responsibility should be paid for by the entire community. Property taxes are inequitable and discriminatory as it would single out a small segment of the population, specifically home buyers and sellers, to pay for a community-wide need.
  2. Exclusionary & Unstable Revenue Source. Transfer taxes are exclusionary because it would increase the cost of home ownership and in effect create an additional barrier to entry for an already expensive part of the state. Further, the real estate market is highly sensitive to economic downtowns as sales may vary greatly from year to year.; therefore this tax would provide an unstable source of revenue for a current and ongoing community need. However well intentioned, the fact that a transfer tax may contain a "sunset" provision does not change the problematic nature of this tax scheme.
  3. Subert Prop. 2½. The tax would subvert the voter approval process inherent in a Proposition 2½ override, in which voters can decide for themselves whether to increase their own property taxes. In fact, both islands have among the lowest property tax rates in the entire Commonwealth.
  4. CPA, 40B, 40R, 40S. The Legislature has already given all cities and towns many equitable tools to create affordable and workforce housing through passage of the Community Preservation Act, Chapter 40R, Chapter 40S and Chapter 40B. These tools are available for all communities to use. According to information provided by the Dukes County Regional Housing Authority last year, 3 of the 6 communities on Martha's Vineyard did not have a single unit of 40B housing.
  5. Foreclosures & Short Sales. Today's housing market conditions, with increasing foreclosures and "short sales," make transfer taxes even more detrimental to home owners. Because transfer taxes reduce one's equity, homeowners attempting to avoid foreclosure or selling their home for less than the outstanding mortgage – selling short – may face new burdens just to sell their home. For those with little or no equity in their home, these transfer taxes could force sellers to sell short or else, in some cases, face foreclosure.
  6. Equity Stripping. It is important to remember that, unlike a home purchase which can be financed, payment of a sales tax CANNOT be financed. Such a tax would cost thousands of dollars at closing taken from the seller's proceeds assuming that the seller has equity in their home at the time of sale. In some ways, a transfer tax can be looked at as a type of municipal "equity stripping" of the value of one's home.
  7. Voter Representation. Finally, the fact that Martha's Vineyard and Nantucket already have a significant transfer tax (2% of the sale price) in place for the acquisition of open space makes the argument for rejecting S.2546 and S.2544 even more compelling. Furthermore, most of the people who would pay this tax will not be able to vote on it. Many, if not most, of the purchasers who will pay this transfer tax are not residents of the communities of Martha's Vineyard and Nantucket.
For the preceding reasons, the NSAR Government Affairs Committee urges all Realtors® and like-minded citizens to contact your State Senator and urge them to vote “NO” on S. 2546 and S. 2544. For comments/questions, please do not hesitate to contact us at governmentaffairs@northshorerealtors.com.

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