The proposed recordation tax legislation (CR85-2020) was a hot topic during the recent Howard County Council budget work session. Prior to that work session on Friday Councilman Opel Jones posted a statement on Facebook. Part of that statement was the following:
“Although I am stunned with the submission of my colleagues’ budget amendments, I remain steadfast that the best solution to balance our county’s budget is a progressive recordation tax restructure proposed by Councilwoman Christiana Rigby. The proposed legislation is NOT an increase, it is a restructure, and will generate $20 million in revenue for the county’s Operating Budget.
According to the County Auditor, 76% of this revenue comes from a 2% tax on real estate transactions over $1 million–ensuring that land developers and corporations continue to pay their fair share to support our top-rated school system. Furthermore, this pragmatic approach lowers the recordation tax on home equity loans and makes ownership for first-time homeowners more attainable. Again, this is NOT an increase as some of my colleagues will have you believe; it is a restructure. Some residents will pay less recordation tax, some will pay the same, others will pay more.
I am proud to co-sponsor this progressive restructure of the county’s Recordation Tax, which will invest in our communities and schools. I believe this common-sense approach to balancing our county’s budget is rational and fiscally responsible without “gutting” essential services for our 352,000+ residents. This proposal would DECREASE the recordation tax for anyone buying or selling a home under $300,000, and would minimally increase the recordation tax for anyone buying or selling a home under $436,000, the median sale price last year. To put this in context, unless you are buying a home, selling a home, or conducting some other real estate transaction, you DO NOT PAY the recordation tax.”
That part of his statement about the proposed budget amendments got me thinking…is this a tax restructure or a tax increase? The simple answer is that this proposed legislation is actually both.
First let us look at the restructure question.
The current recordation tax structure is a simple $2.50 per $500 tax. Super simple and super easy to calculate for residents.
The proposed recordation tax structure in the legislation is:
- $2 per $500 for the first $0 to $250,000
- $5 per $500 for the next $250,001 to $500,000
- $8 per $500 for the next $500,001 to $1,000,000
- $11 per $500 for $1,000,001 and above
I know…not as simple a formula to figure out…thank goodness Dr. Chao Wu provided us a breakdown (note – I copied his chart and put it in Goggle Sheets so you could see it online and not have to download a copy): https://docs.google.com/spreadsheets/d/1JFy5T2CKZgS9FSWNZryhmwnJpUpxXxqVILSyoT4OskQ/edit?usp=sharing
Now that we have the restructure question out of the way and a chart to see what the new taxes would be…we have to ask the question…is this a tax increase? The answer is yes for any buyer or seller of a property with a value over $300,000.
As you can see from the chart this is a tax decrease for all property purchases and sales under $300,000…$300,000 is the break even and then the tax rate starts to increase for properties over $300,000.
This is clearly a progressive tax increase of all properties with values over $300,000….starting at a low tax increase at $300,500 and rising significantly as property values increase. This would affect not only developers but the current home owners looking to sell their property and future home buyers in Howard County. (As a note – according to Zillow today: The median home value in Howard County is $459,507)
So there we have it…the answer to the question asked in the title is that this legislation is both a tax restructure and a tax increase on properties valued more than $300,000.
Now if the target of this legislation is the $1,000,000 properties that would generate 76% or the revenue (or nearly $16 million based on the HoCoGov proposed budget statement that the proposed recordation tax would generate $21 million in revenue)…maybe this would be a good idea:
Leave the in tax decrease in for properties under $250,000. Tax properties valued at $250,001 – $1,000,000 at the current tax rate. Propose a tax rate needed for the funding for properties valued over $1,000,000 that would generate that $16 million into the budget for next year (I have not done that math but I am sure someone in the HoCoGov budget office can do it quickly).
This would still be a progressive tax (maybe not as progressive as the proposed legislation) that would be targeting the really well to do home buyers and sellers and the developers and letting other home owners and buyers not burden this tax increase during this global pandemic that is devastating our economy, our businesses, our work stability and our personal finances.
That is just my thought. I am sure I will hear from many why this is a bad idea. They may all be correct and this is still not a great thing to do in this current economic environment. I will admit that I am not an expert and will leave it to those that are experts and those in charge of legislation to figure out the best course of action. Just thought I would put out an idea for people to kick around a bit.
Here are other recent blog articles related to this topic:
The County Council is meeting on Wednesday May 27th at 10:00am to deal with legislation related to the Budget Adoption. If you support this recordation tax legislation or oppose it…make sure they know how you feel: firstname.lastname@example.org
Have thoughts on this topic…let me know in the comments.