A bill to reduce Delaware’s real estate transfer tax from 4% to 3% was released Wednesday by the House Administration Committee.
Introduced by Rep. Bill Bush, D-Dover, House Bill 358 would enact something Rep. Mike Ramone, R-Pike Creek South, has been preaching for years: lowering the cost of the real estate transfer tax of Delaware after its increase during financially difficult years.
The real estate transfer tax is levied on the purchase price of the house and is generally shared between the buyer and the seller, unless otherwise negotiated.
Delaware currently has the highest real estate transfer tax in the country.
In 2017, the Delaware real estate transfer tax was effectively increased from 3% to the current level of 4%. This decision was made as part of a revenue-generating program aimed at filling a large budget deficit.
The decision to cut the tax comes after two years of raging sales in the housing market, resulting in windfall tax revenues for state and local governments.
The market is also faced with rising interest rates intended to slow inflation. This has some real estate experts expecting a slowdown in sales, in part due to the lack of new homes.
Revenue from the 4% real estate transfer tax is split between state and local governments.
The state currently receives 62.5% of revenue, with the local presiding government collecting the remaining 37.5%.
The new bipartisan bill would reverse the state’s 2017 tax hike, restoring the effective combined real estate transfer tax to 3%.
Under the measure, only the share of state revenue would be affected. Revenue paid to local governments from home sales would remain unchanged.
According to Long & Foster Real Estate, the median price for a home sold in Delaware in February was $335,000.
HB 358 would reduce the transaction cost for the sale of such a home by almost $3,400.
Based on the latest estimates from the Delaware Economic and Financial Advisory Board, HB 358 would allow buyers and sellers to collectively retain more than $100 million per year.
Representative Valerie Longhurst, D-Delaware City, said she would support the bill in the House if an amendment was attached that would cause the bill to expire or expire after a certain number of years.
House Speaker Pete Schwartzkopf, D-Rehoboth Beach, voted to release the bill but warned it would have to go through the Appropriations Committee because the Senate has already passed the fiscal year 2023 budget and the House hopes to pass it on Thursday.
All five members of the House Administration Committee voted to release the bill.
Charlie Megginson covers government and politics for Town Square LIVE News. Contact him at (302) 344-8293 or [email protected] Follow him on Twitter @cmegginson4.