Not surprisingly the deed transfer tax has come up as an issue in Kentville. This tax is an option for Kentville Town Council to consider as an “additional” source of revenue but the Eastern Kings Chamber of Commerce has stated its opposition to the proposal. The EKCC has some good arguments against it.
1. It is a regressive tax, not tied to income and so requires lower income people to pay a larger percentage of their income than higher income people. Generally, it has a negative effect on people’s ability to buy a home.
Property tax generally is not tied to income. It is built on a rather unreliable premise — that wealthier people’s homes are assessed higher than less well off people and can afford to pay more tax. Actually location has more to do with it. A less wealthy person having little choice in location and owning a home in Halifax or Wolfville may pay more tax than a wealthy person out in the county. Also older homes which might be owned by wealthy people seem to have lower assessments. Shore properties owned for generations by not necessarily wealthy people can see jumps in assessment. Assessments aren’t necessarily a good indication of value. Many homes sell for over the assessed price and many also sell well below it. The dtt would definitely have a negative effect on home purchases, especially first time buyers.
2. It is an unfair tax. It taxes buyers for a portion of municipal services for which they have received no value. This also means existing taxpayers are not paying full value for the services they receive.
It is unfair for another reason also. It penalises people new to the town over those already resident. At 1.5%, as it is in Wolfville, it represents a doubling of a new home buyer’s tax that first year which should allow a drop in rate for all residents [but in Wolfville hasn’t because they spend it!! — but that is beside the point]
3. It is a disincentive to development as it effectively adds another cost to developers/builders trying to develop and sell property.
Certainly very possible, or it may encourage unscrupulous developers to cut corners in other ways. Not good.
4. It is a hidden tax. Existing homeowners are not affected; only unsuspecting people who want to buy a property in your community.
This is a reference to the unfairness we mentioned under #2 but it is also hidden in that new buyers don’t often find out about it till the last minute, on closing, when they have to come up with additional cash. And yes, existing residents don’t know about it generally, especially when the town doesn’t bother to pass this revenue “saving” on to residents by lowering the rate.
5. It has an overall negative affect on economic development. It affects the number of people who sell and buy within the same municipal unit.
Those who might consider upgrading or downsizing within the municipality might not because of this tax. This reduction of activity affects real estate agents’ business (and other businesses too — think of expenses in a “new” house; truck rental or moving van charges, drapes, furniture, carpeting, appliances, paint) which of course spins off into the community in all kinds of ways, as the EKCC rightly points out.
New construction and resale housing are two of the most significant contributors to the local economy. According to a study carried out by the Canadian Real Estate Association (in an analysis of spinoff expenditures directly related to house sales between 2006 and 2008), the average homebuyer spends $28,925 over and above the cost of buying the home: for such things as furniture, moving costs, renovations, professional services and household goods.
We could add — This “welcome to town” tax ( inWolfville it was called the Welcome to Wolfville tax ) immediately gives a newcomer a sour impression of the town.
If a municipality needs more money the Council should be up front about it. Raise the rate and be ready to defend it by showing the services residents receive. Don’t hide behind other charges like the deed transfer tax.