To prevent another increase in property taxes (most counties’ main source of revenue) while providing increasingly costly services, the commissioners have approved seeking a four-tenths of a percent land transfer tax (equivalent to 3.8 cents in property tax) that would apply to property sales. That option will be put to the voters during the May 6 primary.
A land transfer tax is a one-time tax assessed at the time that a home, office building, land or other real estate is sold. It is calculated and collected like the existing deed stamp tax, which the seller of real estate pays at closing. The 0.4% land transfer tax is generally applied to the property’s sale price. For example, the tax on a $100,000 home would be $400.
Excluded from a land transfer tax are: cars, boats, planes, personal property, gifts of real estate and inherited real estate transfers, will-related transfers of real estate, foreclosure deeds (or deeds in lieu of foreclosure), deeds of trust and term leases, government transfers, consolidations and mergers, legally mandated transfers of property, and any transfers where nothing of value is provided in exchange.
If approved by the voters, the land transfer tax is estimated to provide revenues in excess of $1.15 million for fiscal year 2008-09, $1.175 million for 2009-10, and $1.2 million and above for 2010-2013. This new revenue would provide for capital needs such as the new law enforcement center, library expansion and mandated school improvements.
“As commissioners, we are charged with providing quality infrastructure while keeping property taxes low. The board members take that charge very seriously,” said Commission Chairman Richard Blackburn during Monday’s board meeting. “We have a low tax rate (10th lowest in the state), but we are still proud of our infrastructure such as our schools, this courthouse, and the farm services building. But with time, our needs grow so we need to find new sources of revenue.”
Blackburn and the other commissioners say it is unfair to place the burden of revenue on property owners, adversely affecting the elderly and lower income homeowners, but outside of some sales tax proceeds, property taxes are the sole source of revenue for a county’s capital needs. Last year, the General Assembly gave counties the ability to raise revenue through two new sources: land transfer tax or quarter cent sales tax. Either option would have to be approved by voters.
The commissioners chose the land transfer tax because they said it would provide the most money with the least impact on local residents.
Commissioner Larry Rhodes said the board looked long and hard at these choices, and noted that while sales tax is paid every day, a land transfer tax is a one-time tax on a property sale. He said 80% of recent property sales are to second homeowners from outside Ashe County.
Chairman Blackburn added that of the remaining 20% of property sales, 7% are by speculators, 10% by locals, and 3% are gifts or inherited transfers, which would not be impacted by the land transfer tax.
To learn more about the proposed land transfer tax, check out a brochure prepared by the county and available at various locations around Ashe County including the county manager’s office in the courthouse. The county manager’s office also has more information on the proposed tax and what it would mean for the county.
Commissioner Marty Gambill said the question of who pays a land transfer tax is up to the seller, and if people are willing to pay a little more to get what Ashe County has to offer, then that fee can be included in the sales contract.
While a land transfer tax could impact the real estate market in Ashe County, a buyer would have to decide if the real estate is worth the price, added Commissioner Judy Poe.
Real estate markets and sales of second homes tend to slow down with a slowing economy, Blackburn said, but the second home market in the mountains doesn’t always drop with an economic slowdown. Revenue from a land transfer tax would be used to improve infrastructure making Ashe County stronger and even more competitive with its neighbors.
There is no other choice if the county continues to provide services, Blackburn said. Voters must approve the land transfer tax or there will be an increase in the property tax rate of at least 3.8 cents.
(Watch for more information on this proposed new tax in upcoming editions.)