RALEIGH — The Republican-controlled House agreed today to try to undo a law that gives counties the chance to raise the tax on land and building transactions and keep the extra revenue.
The land transfer tax option — passed by Democrats four years ago — would be repealed in legislation approved 78-38 and sent to the Senate. The law has never been carried out fully because a county’s voters have yet to authorize the higher tax, which is a prerequisite of the law.
More than 20 attempts to get referendums on ballots have failed, a sign that voters never wanted the tax to begin with, said Rep. Julia Howard, R-Davie, one of the chief bill sponsors.
“It’s very obvious that the people do not support this transaction,” Howard said during the debate.
The land transfer tax was a provision tucked in the final budget law in 2007, a result of weeks of negotiations between House and Senate Democrats who controlled the Legislature at the time. It allowed counties to raise the land transfer tax from 0.2 percent to 0.6 percent of a home’s sale price. That tax would place another $800 on a $200,000 home or other piece of property.
The land transfer option was a concession to urban counties that wanted an alternative to sales tax to generate more income. The counties had shifted a portion of the sales tax they got to keep in exchange for the state footing the bill for all medical costs associated with Medicaid.
The real estate industry was adamantly opposed to the land transfer option, which it calls a “home tax” that would discourage ownership. The North Carolina Association of Realtors and its local member organization have formed campaigns to oppose the local tax referendums when county commissioners have scheduled them.
“The ballot measures have been soundly defeated, many by an average of 70-30 percent,” state association President Stephanie Walker said in a prepared statement. “Property owners shouldn’t be subjected to the referenda over and over again when it’s very apparent they are opposed.”
County boosters have said all 100 counties need the flexibility to raise funds for education, capital and other projects. Seven eastern counties already have authority to assess a 1 percent land transfer tax. They point to a narrow defeat for the local options in Avery County in 2009 as proof it still could be useful.
“Leave this in place,” said Rep. Becky Carney, D-Mecklenburg, a former county commissioner. “I don’t want counties to have empty tool boxes. We need to be a part of giving them options.”
The 2007 budget also gave counties the chance to raise the sales tax by 0.25 percent, and 18 counties have chosen that option. The sales tax option wouldn’t be affected by today’s bill.
David Thompson, executive director of the North Carolina Association of County Commissioners, said counties “worked very hard to get the land transfer tax option, and it is not right for the state to take away counties’ ability to pursue this alternative.”
House Majority Leader Paul Stam, R-Wake, criticized Democrats for talking about giving voters the option to vote on land transfer tax increases. He said they shunned statewide referendums on borrowing money during the past decade, preferring debt that didn’t require voter approval.
More than 10 Democrats joined Republicans in voting for today’s repeal.