Housing industry, county leaders stage battlefield as tax debate heats up

A battle over whether to tax property transactions will soon be playing out in communities across the state, but likely nowhere as fervently as the mountains where resentment toward newcomers runs high, but so does fear of upsetting the real estate-driven economy.

Counties won permission from the state legislature last week to enact a 0.4 percent tax on real estate transactions, but with one catch — voters must approve the tax through a countywide vote. The real estate lobby has been fighting the idea of a property transfer tax at the state level for several years, managing to defeat it until now.

Having lost in Raleigh, the real estate industry has no choice but to shift the fight to the county level. The first battle will play out in county commissioner boardrooms. County commissioners have to decide whether to put the tax out for a vote. If so, the fight will move to the voting booths.

“We are 100 percent against the land transfer tax,” said Cathy Garren, president of the Cashiers-Highlands Board of Realtors. “We are in a depressed state as it is in the real estate industry. It will dampen our economy even more.”

Supporters of the tax claim it targets those moving here while giving locals a break on their property taxes.

“It is a way of getting the people moving into the community to pay their share,” said Macon County Manager Sam Greenwood. “It means that the existing citizens who already live in the county and pay property taxes in essence get a break from not having to pay for the impact of new people moving into the community.”

While the tax would impact locals buying their first home or moving from one home to another, county leaders favoring the tax primarily see it as a way of taxing those moving in. Jackson Commissioner Chairman Brian McMahan said that’s how he would explain it to voters.

“It is not a tax on everybody in the county, only those placing the heaviest burden on the county to help pay for infrastructure,” McMahan said. “Current property owners would not pay anything unless they decide to move.”

But opponents question exactly what burden growth in the mountains is having on county coffers. Many of the people moving here are retired. They don’t have kids clogging the schools. They aren’t sapping social services. They have wells and septic tanks — not water and sewer provided by the counties or towns. And the counties don’t build roads.

Marty Jones, a Realtor in Cashiers, said he doesn’t see what demands newcomers are putting on the system.

“In some markets that is true, but that is not the case in Jackson County,” Jones said. Jones called the tax a “money grab.” He said the county leaders will try to pitch it as a tax against Floridians, but that’s not the case. The tax is paid on the sale of every piece of home and land — locals included — and is actually paid by the seller at closing.

“The theory is they will just raise the price, but they can’t. It doesn’t add value,” Jones said.

A half-million dollar home will still be listed at half a million. The tax will be that much less the seller walks away with.

“That owner of real property will have already paid God knows how much in property taxes over the years he has owned the property. Now you are going to hit them again,” Jones said.

Sellers will certainly attempt to pass the cost along to buyers, however, and that could drive up home prices, Garren said.

The additional 0.4 percent tax on real estate sales would add $800 to a $200,000 home, or $2,000 to a $500,0000 home. The tax could pose an extra barrier to first-time homebuyers and cause second-home buyers to look across state lines, Garren said.

“Second-home buyers don’t have to buy a house and they don’t have to buy a house in North Carolina,” Garren said. “They are very conservative with their money and they do look very loosely at fees.”

Jackson County Commissioner Tom Massie disagreed.

“An extra $800 on a $200,000 home — I doubt that would stop anybody,” Massie said.

In Macon County, Commissioner Charlie Leatherman also agreed.

“I don’t think four-tenths of 1 percent will make a difference,” Leatherman said.


Funding the fight

Leaders in both Macon and Jackson counties plan to pursue the property transfer tax, and both are bracing for a campaign waged by the real estate industry to defeat it in the voting booths.

“It is only to be expected. The real estate lobbying group worked hard in Raleigh to try to get it defeated,” Leatherman said.

The tax would come from the sale price on homes — the same place Realtors get their commission. Leatherman said Realtors are opposed to it out of fear it could cut into their profits.

Macon Commissioner Jim Davis questioned whether the Realtors are genuinely concerned about driving up home costs. The tax is just a sliver compared to the commission Realtors collect out of the sale price of a home, Davis said.

“They take 6 percent commission and they are complaining about the government taking less than half a percent?” Davis said.

Jones said he figured that’s how the real estate industry would be portrayed — as greedy and looking out for its own interests.

“It won’t effect our commissions, but that’s how it is going to be sold,” Jones said. “What we stand for is protecting the rights of property owners.”

Jones said his industry is the one speaking out because they are in a position to do so, but it is not for their self-interest.

“Someone has to step forward and say ‘Look guys, this is not just a tax that is going to hit Floridians. It is coming out of your bottom line,’” Jones said.

Given the anti-development sentiment in Jackson County right now, Jones isn’t optimistic about their chances of defeating the tax. But Garren said she believes the voters will see the tax for what it is and not buy the county’s line.

“I think the voters are smarter than that,” Garren said.

Jackson County Commissioner Tom Massie said the county doesn’t have money to combat propaganda driven by the real estate industry. But the county does have credibility on its side, he said.

“We won’t have the resources to finance the campaign that they will,” Massie said. “However, the Board of Realtors have been vocal on other prominent issues in Jackson County over the past year, and I think the public will take into account the source of the information and make the proper decision.”

It won’t be the first time the real estate and development industries have been at odds with Jackson commissioners and have attempted to sway public opinion to their side. They came out strongly against a moratorium on new subdivisions, claiming it would hurt the economy.

“According to them we should all be unemployed by now and that didn’t happen,” Massie said.

Many in the construction and development industry claim the moratorium did hurt the economy, but not everyone has seen it yet.

Macon Commissioner Charlie Leatherman said the voters should be armed with plenty of information one way or the other by the time they head to the polls.

“We will explain our reasoning for it. The real estate people can explain their reasons for being against it, and the citizens will have the choice. The citizens will be the one to say ‘yes’ or ‘no,’” Leatherman said.


When to hold the vote

Commissioners can schedule a countywide vote on the issue whenever they please. It does not have to be in conjunction with another election, although to do so saves the hassle of holding a special election. Printing ballots, organizing volunteers to man the precincts, programming voting machines, registering voters, and sundry other tasks go along with an election, said Jackson election director Lisa Lovedahl-Lehman. And those things costs money, Lovedahl-Lehman said.

A special, one-issue election held at an off time of year means a smaller cross-section of the general public will turn out to vote.

“People don’t come out as much at an odd time of year to vote,” Lovedahl-Lehman said. “Unless that is something that you feel strongly about, you aren’t going to have a lot of people come out at a different time of year for a special issue.”

It’s hard to say which side stands to benefit from a smaller voter turnout. On one hand, the real estate industry could tap into its existing network and turn out the “no” vote more easily than tax supporters could turn out the “yes” vote. Those passionate about defeating something are generally easier to motivate, while supporters might simply stay home, assuming it would pass.

On the other hand, if a vote on the tax was held in conjunction with the May primary or November general election, the masses turning out to vote for president might be stumped when they get to the question at the end of their ballot about a real estate transfer tax. Voters will be from all walks — not solely those educated on the special issue.

They will either leave it blank or guess at its meaning. Some might vote “no” just because it is a tax. Others might vote “yes” if they think Realtors or newcomers are being taxed. It would be harder for both sides to control their message in this type of climate.

The one exemption could be in Jackson County. There, the public has had a front-row seat in a battle between the real estate and development industry versus the county commissioners — first over a moratorium on new subdivisions followed by a tough slate of mountainside development laws.

The real estate and development industries have lost for the most part, with county commissioners this week putting their final stamp of approval on the toughest slate of development regulations ever passed in the state. Opponents have pledged to take the fight to next year’s election, when two of the commissioners who supported the regulations are up for election. The opponents have pledged to unseat Commissioners Mark Jones and Joe Cowan. Stickers worn to public hearings called for a “Moratorium on Jones, Cowan in 2008.”

The hype over that election — with growth and development issues playing a central role — could make the average Jackson voter more likely to also pick up messages about the property transfer tax.


All eyes on Macon

For Macon County, the choice is easy. Commissioners are ready to put the vote on the ballot in November, coupled with $64 million in bonds for schools, recreation and other projects already slated for a countywide referendum (See story page 4).

With Macon County out in front, other counties seem content to sit back and watch how the battle there plays out first. The vote in Macon could serve as a litmus test for how warm voters are to the idea of a property transfer tax.

What differs in Macon, however, is the vote on the tax will be coupled with the school and recreation bond — giving voters a clear picture of how the county plans to spend the new money it brings in. Pass this property transfer tax and we’ll build schools and a new recreation center, the county in essence will be saying to voters. Macon County Manager Sam Greenwood said it could make the tax more palatable.

In other counties, the request could be more nebulous. Jackson County Chairman Brian McMahan said he would like to spell out how the county plans to use the money in conjunction with a vote on the property transfer tax in Jackson.

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