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Real estate transfer tax: Kicking a market when it’s down

December 15, 2008

By Dr. Eric Fruits

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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Discuss this article

Shane December 15, 2008

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…

Max IV December 15, 2008

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.

Go Jo December 15, 2008

Bad idea.

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