The State of Connecticut Budget proposal includes a conveyance tax on buyers of real estate. The tax imposed would be 1% of the purchase price on homes purchased above $150,000. Here are 3 reasons this proposal should not be passed:
1) Increased Taxes Will Result in Decreased Real Estate Purchases – This really is economics 101. One way to slow down purchases is to put a tax on them. I would think this is the last thing we should be doing to real estate transactions, adding a tax.
2) Increased Taxes Will Have a Domino Effect – This tax will penalize all of the other goods and services that benefit when a house is sold. The economic food chain from real estate purchases is long and far reaching. It starts at the closing where the realtor, attorney and insurance agent get paid. Then there is the moving company. After that, all of the things you need to make a house a home kick in, appliances,new furniture and home improvement projects to mention a few.
3) It's The Wrong Industry to Pick On – If you had to pick the number one industry that was down and either needs to be left alone or supported in Connecticut it would be real estate. OK, I suppose you could argue that contractors or manufacturers could be the number one industry. Either way, it's at the very top of any list. Adding a tax to an industry that is down is crazy. The federal government gives taxpayers tons of incentives to buy homes. The mortgage interest deduction and the real estate tax deduction have been a meaningful deduction for homeowners for many years. Recently, the federal government was offering a First Time Homebuyers Credit of $8,000 and a Long Time Homebuyers Credit of $6,500. These were designed to support the policy of homeownership.
ACTION ITEM: Contact your legislator if you do not want to see this tax implemented. To find your legislator, click here.
Thomas F. Scanlon, CPA, CFP®
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