Taxes on the Table

Gov. Taft's Budget Proposal includes taxing Real Estate Services

Bob Miller, President In order to balance Ohio's fiscal budget, Gov. Taft has proposed taxing real estate commissions, title services, property management services, appraisals and property inspections as well as slashing the tax rollback on commercial properties. For an outline of the tax proposals, click here.   To voice your opposition to your legislator, click here.

For more information, visit www.ProtectingtheAmericanDream.com, established by the the Ohio Association of REALTORS®.

As you are now well aware, Ohio needs to fill a projected $700 million shortfall in the current budget, which ends on June 30. State’s, unlike the federal government, are prohibited from deficit spending and must have a balanced budget.

For the short term, Gov. Taft proposed increasing cigarette and alcoholic beverage taxes or raising the sales tax from 5 percent to 6 percent until the fall of 2004.  The Ohio Legislature didn’t agree.  As a result, more than $160 million will be eliminated from state aid to Ohio schools, higher education, senior citizens and drug treatment.

Gov. Taft’s long term plan is our concern now.His proposal includes taxing real estate commissions, slashing the tax rollback on commercial properties and implementing a sales tax on property management, appraisal, inspection and title services. For an outline of the tax proposals, click here.

Within hours of Gov. Taft’s announcement, REALTORS® were in action. In less than three weeks, more than 14,100 e-mails and letters had been generated by real estate professionals urging state lawmakers to stop Gov. Taft’s real estate tax plan. Of those, Gov. Taft received more than 3,600, Ohio’s state senators and representatives received nearly 9,200 and statewide media received nearly 1,100 letters to the editor.

We need to continue to communicate to our lawmakers that these proposals will adversely affect the housing market for a number of reasons...

 

Sales Tax

Ohio law already requires a tax on the transfer of property (conveyance fee) of one dollar per thousand dollar of value. 70 of 88 counties in Ohio levy a conveyance fee more than the minimum amount prescribed in law. As local government funds are reduced by the state, it is likely that more and more counties will raise their conveyance fee to offset the state reductions.

 

REALTORS® in Ohio already pay Income Tax on the commissions they earn.
A typical REALTOR® in Ohio is 53 years old, has been involved in real estate for 11 years, works full-time, and earns $27,000 in real estate related income per year.  Nearly 50 percent of REALTORS® in Ohio pay their own medical insurance.

An expansion of the sales tax to include real estate commissions may pressure REALTORS® to lower commissions to a level that offsets the tax liability or, more likely, pass the tax on to the buyer or seller. As a result the tax will drive-up the cost of buying and selling a home.

Research by the National Association of REALTORS® shows that for every $100 increase in the overall price of a home, approximately 1,200 households will be priced out-of-the homeownership market.

For every one percent increase needed for a down payment, home affordability decreases by up to 70 percent for potential home buyers. 

Expanding the sales tax base to include real estate services, hurts those families and individuals who can least afford it by pushing them out of the housing market.

It is important to note what is sometimes overlooked, namely that new homebuyers expend their income making improvements to their homes, and these purchases are subject to the sales tax, which in turn spurs Ohio’s local and state economy.

The expansion of the sales tax to real estate management services will increase the cost of rental real estate for young Ohioans, whose goal is to someday attain the American Dream of homeownership. This will only delay this goal because it will make saving for a home purchase more difficult.

Real Property Tax
The commercial real estate market, particularly in Ohio’s large metropolitan areas, is experiencing unusually high vacancy rates and the proposed rollbacks will only aggravate this problem.  Commercial property owners will be forced to offset their loss by increasing rents when renewing.  Owners already in long-term lease situations will have no recourse.

Commercial and residential real estate is the driving force of economic growth and development within our state, cities and neighborhoods. Real estate’s impact on the economy is the catalyst for providing Ohioans with good jobs and our children with first class schools. We need businesses and property owners to keep investing in our neighborhoods and communities. A $220 million tax increase will not encourage economic development within our communities.

With each passing day, thanks to you, we are moving closer to our objective of having the Legislature reject the Governor’s tax proposals in favor of more equitable solutions to the budgetary shortfalls. BUT WE MUST continue what we are doing and keep up the pressure on our lawmakers.

Another important way for you to help in the fight is to support CORPAC (Central Ohio REALTORS® Political Action Committee.)  Contributions to CORPAC go to help support lawmakers who support real property issues as well as to support issues that will improve our housing industry.