By Rich Fowler
Staff Writer
Pros and cons of a proposed 0.4 percent land transfer tax got an airing last week at a forum sponsored by seven Orange County Democratic Party precincts.
The forum, held Thursday at the Homestead Community Center, featured Sen. Ellie Kinnaird and County Commissioner Mike Nelson in support of the transfer tax, and Mark Zimmerman, vice president of the Chapel Hill Board of Realtors and a spokesperson for Citizens for a Better Orange County, a group aligned against the tax.
Orange County commissioners opted to add the tax to the May 6 ballot as a potential revenue source to replace sales taxes the county will lose as part of a deal struck by legislators and county governments in last year’s state budget.
Nelson said he supports the tax, but knows it’s a hard sell. “It’s even more difficult when you’re talking about a transfer tax in a recession, a large element of which is a crisis in the housing market,†he said.
But Nelson said the county needs the money to handle its continued growth. Between now and 2012, the county plans to build a $31-million elementary school and a $55-million middle school to keep up with growth in the Chapel Hill-Carrboro system. It is also considering issuing up to $154 million in bonds to cover future capital needs.
Zimmerman criticized the proposed tax as another kind of sales tax. “It’s a flat tax. It doesn’t differentiate between lower income and higher income,†he said.
Zimmerman expressed concerns that some home sellers are already bringing checks to closings to cover losses. “They have to bring money to closing in order to sell their house. And guess what? They’re going to have to bring more money because of this tax,†he said.
Zimmerman said the county wouldn’t see as many taxable transfers as, for example, Wake County. He said that in Orange County, there are about 1,800 transfers for 120,000 people.
Kinnaird recalled that the tax was a source of great debate in the general assembly. She said that county officials consistently expressed their need for more money.
Kinnaird also said that the land transfer tax is a better option for lower-income people. Those people, she said, “should not be priced out of our county because of high property taxes.â€
Nelson said the issue speaks to the Democratic Party’s values. He said that when he was given the choice of a sales tax or a land transfer tax, he decided to go with the more progressive option.
“A core reason I’m a Democrat is because I believe in progressive, fair taxation, and there’s no doubt that the sales tax is a regressive tax,†he said.
Carrboro Mayor Mark Chilton spoke during the question-and-answer session. He also favors the land transfer tax. He thinks the county needs to keep property taxes down to help low-income property owners.
“Those who are out there flipping real estate, who are promoting Chapel Hill schools to sell their real estate, who are developing in our community — let’s tax those people,†he said.
Zimmerman supports a 0.25 percent increase in the county sales tax, because visitors to Orange County would contribute to the tax.
“The amount of money that any one individual would pay in that sales tax is negligible.†He said that if approximately 96,000 people in the county paid the new sales tax, and only one-fourth of the 1.58 million visitors to the county last year also paid it, it would average out to $5 per person per year.
He said that given the current state of the real estate market, the sales tax would be a much more stable source. “Unfortunately, for my business, we’re down about 22 percent more in our sales,†he said. “We have all these growing costs, and we’ve chosen a tax mechanism that’s declining.â€
County Commissioner Moses Carey does not favor adding another sales tax. He said that Orange County’s sales tax revenues are going down because other counties are taking business away from the county.
“We’ve got those engines like Southpoint on our borders, sucking the money out,†Carey said, “and people who live in Orange County are making a beeline over there to spend their money.
“When I say to people, ‘Spend locally,’ they say, ‘Well, we can’t find it here.’â€
Nelson and Kinnaird said they realize it will be difficult to convince voters of the merits of the transfer tax, given its organized opposition. Land transfer taxes have already been defeated in 16 counties.
“I think the problem was that people didn’t understand what the transfer tax did,†Kinnaird said. She said that a $100,000 ad campaign by realtors calling for voters to “Defeat the Home Tax†was misleading.
“What a ridiculous thing. You already pay a property tax. If that isn’t a home tax, what is a home tax? This was, I felt, a very biased and very inflammatory ad campaign,†she said.
Nelson agreed: “We’re facing a very, very, very well-financed, ruthless opposition.â€
Six counties have had 1percent land transfer taxes since the 1980s.
“In those counties, the sky hasn’t fallen, they’ve increased their school spending tremendously,†Nelson said. “Before they adopted the transfer tax, they were in the bottom third in North Carolina in terms of per person spending on school capital needs.â€
Kinnaird said that in the counties that have already had the tax for a while, it hasn’t stopped growth, the schools are benefiting and property taxes remain stable.
But Zimmerman said the reason people are against the tax is because they’re the ones paying it.
“The people that are going to be hurt by this are not the realtors. We don’t pay this tax. The people who are going to be hurt by this are the people who go to closing and have to pay this fee,†he said.
Orange County’s own opinion poll shows that 53 percent of those surveyed would either vote no or are leaning no, while only 33 percent would probably vote yes or are leaning yes. The county is contemplating spending up to $100,000 on a countywide information campaign about the tax.
Nelson said he was not sure what would happen if the tax loses at the polls.
“The commissioners haven’t talked about what we would do next. Whether we put this back on the ballot again in November, or put the sales tax, or nothing, or both— we haven’t talked about it,†he said.