December 15, 2008
By Dr. Eric Fruits
Econinternational
Several states are considering a real estate transfer tax to help boost state and local budgets. During the booming real estate market, such taxes were considered to be relatively low-cost: When a market is hot, everyone can get warm. Now that housing is cooling down, the transfer tax throws a wet blanket on shivering sellers.
Earlier this year, Toronto imposed a land transfer tax on the sale of real estate within its municipal boundaries. A recent study (PDF) published by the C.D. Howe Institute finds that the transfer tax caused a 16 percent decline in the number of single-family homes sold and a 1.5 percent reduction in house values. Unsurprisingly, the decline in house values is approximately equal to the amount of the tax.
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I wonder how this effects people who foreclose or who make basement price sales to get out? Some of those individuals would have to pay.
Bad idea.
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It makes sense. Everyone knows that the best way to increase gov’t revenues during a tough time is to increase taxes, right? Besides, gov’t know better how to spend money than the average Joe.
We should just trust our politicians a little more…