12 June 2007

The Legislature never sleeps......

That time of year is approaching.... the dreaded legislative interim session!   Usually the Guv calls for one when a pet project doesn't get passed in the regular session, or if there is an issue that the public is very fired up about (school vouchers, anyone?).

 This got me thinking about what issues we may be dealing with in the next regular session starting in January, and how they could affect homeowners.  Remember the last couple of years and how hard everyone worked for tax reform? Then in the last session, they passed that huge tax reduction?  Everyone was so happy at the time.  However, two things I'm hearing rumblings about could make us a bit less thrilled come January.  Surprisingly, both of them are actually tax INCREASES!

The first one will only affect those of you that might want to buy or sell a home in the future,(remember, the housing industry accounts for over 30% of the economy in this State!)  I'm hearing rumors of a proposed "Real Estate Transfer tax". Let me explain what this is. Lets say the Smiths want to sell their home.  The Jones want to buy.  So far so good, right?   Everyone gets to the closing table, and there on their closing statement is a transfer tax of between 3 & 7% of the sale price (I've heard amounts within this range).  Lets say the sales price was $200,000 (roughly the average for Tooele County these days). This means that to sell, the Smiths will be taxed between $6000 and $14,000 to SELL their house, plus the potential taxes on the income of course.  Then, the Jones have the same tax on their side of the transaction as well!   This creates tons of problems, not the least of which is, how many buyers these days have that kind of extra cash laying around, especially if they already had to come up with a comparable amount in down payment and closing costs?   Answer is, not many!   Think that will bring things to a halt?  Think this can't happen? Lots of States already have them. 

 Speaking of halting the market, let me tell you about the 2nd nasty rumor I've heard. This one's called a "Professional Tax on Services". Very simply put, in every transaction involving someone who has a professional license in this state, they would face an additional tax. Think that doesn't involve you?  Get your (or your dogs) haircut lately?   Pay an accountant to do your taxes?  Need a Lawyer?  Go to the Doctor?  Yep, Realtors too. But, let me go through the home buying process a minute. Realtor (License), Lender (license), Appraiser (ditto), inspector (yep), Title Company, Insurance Agent too. That's just on an existing home purchase. How about new construction? General Contractor, Surveyer, excavator, foundation guys,framer, plumber, electrician, sheetrocker and taper, roofer, painter, cabinet guy, finish carpenter,garage door guy, flatwork guy, landscaper all have State licenses, plus the ones I already mentioned. 

 In a State where we are already having affordable housing issues creeping in, what do you think this type of tax would do to the industry, and by extension the economy (remember that 30% number)? The Utah Association of Realtors has been fighting both of those taxes for many years, with success.  My worry is that I'm hearing that this time, the leadership in the House and the Senate are on board with the idea of taxes on services. That makes the battle a tough one.  Keep your eyes on your local legislator.  Just because it's only June, don't think they aren't already thinking about the next General session.  January's only 6 months away...  

 
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