Nevertheless, the Moore County Board of Commissioners took a close look at the effect such a tax would have on local coffers at its Nov. 15 planning retreat.
Register of Deeds Judy Martin told the board that a 1 percent land-transfer tax would have added $5.2 million to the county’s General Fund if it had been in place during the 2003-04 fiscal year. It would be the equivalent of several cents on the property tax rate.
Martin and Finance Officer Lisa Hughes explained that the transfer tax is levied against the seller of property, who passes the additional cost on to the purchaser.
County Manager Steve Wyatt said the issue of a land-transfer tax has been discussed by the North Carolina Association of County Commissioners. He called it an issue of equity.
Wyatt noted that Commissioner Robert S. Ewing has long advocated that the county consider a land transfer tax as a way to reduce the property tax rate while meeting special needs. Ewing is retiring from the board and the Nov. 15 round of meetings was his last official participation on the board.
“What we have to do is make sure that people moving in here are helping with the expenses of building new schools and meeting other needs,” Ewing said. “I know you’ll have objections from home builders, but you don’t want to raise property taxes either.”
Commissioner Virginia S. Saunders agreed that a transfer tax would help to meet some of the county’s infrastructure needs, including new schools.
But board Chairman Michael R. Holden pointed out that most of the people moving into Moore County are retirees who do not have children in the school system and thus do not have a significant impact on the infrastructure.
Earlier presentations at the retreat referred to improvements that will call for millions of county dollars in a few years, such as emergency services, utilities and public schools.
Taxing Someon Else
“We’re just trying to tax someone else,” Holden said. “A lot of people moving here don’t have children in the schools. What has made Moore County what it is is the resort and retirement community.”
Holden argued that imposition of a land-transfer tax would just serve to encourage these same people to move to South Carolina or some other resort area with fewer taxes.
Hughes said most of the counties that have transfer taxes are in the eastern part of the state where there are substantial coastal real estate holdings.
Dare County was the first county to impose this tax. That was in 1985. In the 2003-04 year, Dare County collected $10 million in land transfer taxes.
The other five counties are Camden, Chowan, Currituck, Pasquotank and Perquimans. Two other counties, Hyde and Washington, were interested in the tax, but the issue lost in a referendum.
Hughes said the average payment per transaction would be in the $1,500 to $2,500 range. The tax is levied against the seller, who usually raises the price of the property to cover the tax.
“If you own the house and live in the house and don’t sell the house, you don’t pay the tax,” Hughes said.
Commissioner David J. Cummings asked about a situation in which parents want to transfer ownership of property to their children and whether that type of transfer would be subject to the tax.
Martin replied that exemptions, such as a parental transfer of property, could be built into the law.
“You’ve got to look out for the children,” Cummings said.
Alternative Property Tax Hike
Among the positive aspects of a land transfer tax are ease of collection and administration, one-time cost to the payer, an alternative to higher property taxes, and the fact that it does not impact all county residents, just those selling property. It also helps by contributing toward the cost of infrastructure already paid for by people who have lived in the county for many years, perhaps all their lives.
The transfer tax would enable the county to set up a capital reserve fund for future building projects and would enhance support for a bond issue.
And of course, schools are not the only part of the infrastructure. Newcomers also have an impact on such facilities as emergency services, parks and recreation activities and services to the elderly.
On the down side, the decision is not in the hands of the commissioners. Passage of a land-transfer tax requires action by the state legislature.
Other objections to the special tax include opposition from homebuilders, Realtors and contractors. There is also the potential for a negative effect on property transfers and for making homes less affordable, especially for entry-level buyers in the short term. The tax could also hinder economic development.
The tax is unreliable from the standpoint that it is difficult to project the amount of collections, because county officials don’t know from year to year what to expect. A slump in the economy could cut deeply into this item on the revenue side of the budget.
Used For Capital Reserve
Moore is not the only county interested in this tax. There is talk of teamwork by interested counties in approaching the General Assembly for local legislation giving them authority to levy a real estate fee as an alternative to higher property taxes. Mecklenburg, Lincoln, Cabar-rus, Gaston, Anson and Union are among the counties interested in such a team initiative.
Research by Martin and Hughes shows that counties with land transfer taxes generally use this money for specific purposes, such as establishing a capital reserve fund or designating the money for specific capital needs, which could be anything from schools to libraries, recreation, health or social services, a new jail, courts or emergency medical services.
