Realtors Fight Additional Conveyance Tax

By Dottie Evans

To most people, three quarters of one percent does not sound like a lot.

But to the seller of a $300,000 house who sits down at closing and has to sign over a $2,250 combined municipal and state conveyance tax, the amount is significant.

“Half the time, the sellers don’t even know ahead of time they’re going to have to pay this. They don’t find out until the closing and it’s a shock,” said JoAnn Maurer of William Pitt Realty, Inc.

Mrs Maurer is president of the Newtown Board of Realtors and chairman of the legislative committee of the Connecticut Association of Realtors, Inc.

She was interviewed Tuesday on behalf of Connecticut realtors protesting Governor Rowland’s proposed tax increases on residential sales that are going up from the current rate of 0.5 percent to 0.75 percent for homes selling between $300,000 and $800,000.

For residential sales over $800,000, the governor proposes an increase from 1.0 percent to 1.5 percent on any portion over $800,000.

If approved, the proposal would become part of the governor’s two-year state budget plan.

“They were already paying a one percent tax from the late 1980s,” Mrs Maurer said, “which was supposed to have sunsetted [expired] when the economy got better. When we had surplus years in the late 1990s, they never got rid of it. ”

In 1987 during a boom period, Mrs Maurer said real estate values went up 32 percent, but during the recession in the early 1990s, they went down 19 percent.

“When the market does go down it takes a long time –– even years –– to recover,” she added.

Realtors are worried that increasing the state conveyance taxes could set off a downturn in the real estate market, especially since Connecticut sellers are already paying a local conveyance tax to their towns of 0.25 percent.

The Connecticut Association of Realtors, Inc, issued a recent news release stating that “the real estate market is one of the few sectors of the economy to remain strong in the current recession. The recently approved taxes will put home ownership further out of the reach of many middle- and low-income buyers, and the Governor’s proposal will create barriers for Connecticut’s small businesses at a time when elected officials should be encouraging their success.”

According to the release, “The new state tax proposed by the governor and municipal real estate conveyances recently approved by the General Assembly and signed into law…are an unfair burden on home buyers and businesses and they could destabilize the one sector of the economy that has remained robust in this recession –– the real estate market.”

Mrs Maurer added, “We understand that the state is desperate. But they upped the [residential] municipal tax from 0.11 to 0.25 and that’s a “hefty tax.”

Supposedly, on July 1, 2004, the municipal tax rate returns to 0.11 percent as part of the “sunset” provision enacted by the Legislature. But Mrs Maurer said past history does not bode well for that to actually “come true.”

 “This will affect us in Fairfield County big time. A lot of new construction is coming in over $800,000 and it will hurt the builders and lower Fairfield County, especially. That’s why we’re fighting this,” she said.

There should be a “more broad-based tax” she said.

“In tough budget times you don’t kill the golden goose. If nothing else, we’ve got to be sure that this time, the sunset clause is enforced.”