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Budget Allows Voters to Decide on Land Transfer Taxes

(c) Town and Country Real Estate
A land transfer tax could equal nearly a thousand dollars for this $249,000 Belville home.

By Megan V. Williams

Wilmington, NC – Counties have a new tool to raise funds at the cash register, or the closing contract.

Under the budget passed Monday night, which Governor Easley has said he will sign, each county commission has the power to put one of two new taxes to a vote.

Counties can either ask for up to a quarter-cent increase in the sales tax or a new tax on land sales, up to .4% per hundred dollars value.

Residents would then have to approve either tax in a referendum.

Groups on both sides of the issue spent hundreds of thousands of dollars during the budget process trying to sway public opinion, and lawmakers, on the question of a land transfer tax.

Counties have long lobbied for the power to levy taxes on land transfers, saying it's a way to make new residents pay for their added burden on infrastructure like roads and fire departments. However, the budget does not put any restrictions on how counties spend the added revenue.

At its maximum, a land transfer tax would add about $800 to the cost of a $200,000 home.

Six North Carolina counties already have land transfer taxes: Camden, Chowan, Currituck, Dare, Pasquotank and Perquimans have all had 1% taxes in place since the 1980s, according to the North Carolina Association of County Commissioners.

Todd McGee with the Association says counties each individually will have to decide which, if any, of the two tax options to pursue.

"Down at the coast, Brunswick County, New Hanover County, those counties stand to gain a pretty significant amount with the adoption of the land transfer tax versus the sales tax," McGee said.

Realtor and homebuilder groups strongly oppose the land transfer tax, arguing it could price first-time homebuyers out of some markets.

Bill Bright with the Brunswick County Homebuilders Association says he isn't throwing in the towel on this fight yet.

"It's just an unfortunate situation," Bright said, "There's plenty of other ways to raise revenues and they've isolated the workforce housing group to do that."

Brunswick County Commissioners have said they are interested in pursuing a land transfer tax, although Chairman David Sandifer says he doesn't expect the tax to show up on November's ballot. The only county races this year are in incorporated areas, so the county would have to hold a special election to bring the issue to the entire county.

Text of the 2007-2008 North Carolina Budget (.pdf)
The land transfer and sales tax provisions start on page 311.