Delaware will remain the state with the highest real estate transfer tax in the nation after a bill to reduce the tax dies in the General Assembly.
Introduced by Rep. Bill Bush, D-Dover, House Bill 358 would have reduced the tax from 4% of a property’s sale price to 3% – the level it was at before 2017 when the General Assembly raised it to cover a budget deficit.
Bush declined to be interviewed for this story.
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.
The decision to cut the tax came after two years of raging sales in the housing market, resulting in major windfalls for state and local governments, which split the proceeds.
The state receives 62.5% of tax revenue, while local authorities receive 37.5%.
Even though the bill was introduced in March 2022, it was only heard by the House Administration Committee a few days before the end of the session. He was released from committee and assigned to House appropriations, where he was never heard from.
As the legislative session ended on June 30, the bill will have to be reintroduced in 2023.
Rep. Ruth Briggs King, R-Georgetown, said when the General Assembly raised the tax in 2017 to cover a gap in the budget, she promised to bring it back to the original rate once the economic outlook for the state would have improved.
“They seem to have forgotten about that conversation,” Briggs King said. “It’s very disappointing when for two years in a row, when you’ve run out of money – people’s money – that you’re not looking for a way to help first-time home buyers or help people. older people who need it.”
“They’ll be offering so many other new programs that cost millions, but they won’t be looking for something that makes people money, especially in times of unprecedented inflation.”
According Zillowthe median price of a home sold in Delaware in July 2022 was $358,310.
If passed, HB 358 would have reduced the transaction cost of selling such a home by over $3,500 and collectively saved buyers and sellers over $100 million annually.
Briggs King said the bill would have been better placed in the House Revenue and Finance Committee.
In fact, two different bills aimed at reducing property transfer taxes have been referred to the Revenue and Finance Committee.
In 2021, Rep. Mike Ramone, R-Pike Creek, sponsored a bill to raise the tax from 4% to 3%. It was released by Revenue and Finance and sent to the appropriations committee in mid-June, where it was never heard from. Ramone could not be reached for comment.
That same year, Rep. Lyndon Yearick, R-Dover, introduced a bill that would have temporarily eliminated the state’s share of the real estate transfer tax. He was assigned to Revenue and Finance, where he was never heard from.
“It’s a common maneuver – it’s not unusual,” Briggs King said. “They put a bill in the House administration if they know they want it to pass quickly or if they don’t want it to move forward at all.”
House Speaker Pete Schwartzkopf, D-Rehoboth, decides in which committee a bill will be heard.
House Majority Leader Valerie Longhurst, D-Delaware City, decides when a bill will be put on the agenda of the House Administration Committee.
For HB 358, Longhurst decided that it would be considered by the committee the day after the budget was drafted.
“I just want to point out that we passed the budget yesterday in the Senate and the budget is set for tomorrow in the House,” Schwartzkopf told the committee. “That 1% equals $117 million in our coffers and by canceling the 1% we would have to go back into the budget and cut $117 million from projects, services and that sort of thing.
“I will vote to publish this bill, but it goes in the appropriations,” Schwartzkopf said.
Briggs King pointed out that it was Schwartzkopf and Longhurst’s decision to hold the hearing after the budget was drafted, so she doesn’t know why he put on such a show.
“It was their committee,” she said. “That’s not how it should be at all.”
The National Association of Realtors says real estate transfer taxes are regressive and discriminatory.
“Real estate transfer taxes are regressive because the tax burden is higher for low-income households,” the group writes in a report on the subject. “Real estate transfer taxes are discriminatory because they are assessed on one type of asset – real estate – whereas similar taxes are rarely applied to financial assets, such as stocks and bonds.”
Had the bill passed, Delaware’s transfer taxes would still be higher than most: only Delaware, the District of Columbia, New Hampshire, New York, Washington, and Pennsylvania have transfer taxes higher than 1%.
“This administration doesn’t want to change the reality transfer tax,” Briggs King said. “I believe that they anticipate the next two years, there are going to be budgetary difficulties again.”
Even so, Bush told the committee he would consider a sunset clause so that the General Assembly would be forced to return to the matter after a period of time.
“I think it’s a great idea,” Bush said. “I think it’s important to get this out of [this committee] and put it in the credits.
It never materialized.
Justin Olear, president of the Builders and Remodelers Association of Delaware, said the bill would have been key in helping Delawares access and retain homeownership.
“In Delaware, homebuilders over the past year have become increasingly concerned about our ability to provide affordable housing, coupled with regulatory operating, development and construction costs in the state” , Olear said. “Our product offerings over the past 12-18 months have seen huge cost increases and unfortunately these costs are being passed on to buyers and tenants.”
Lewes realtor Beau Zebley, past president of the Delaware Association of Realtors, told the committee that the General Assembly has an opportunity to provide needed assistance to Delawareans.
“Individuals and families across the state are hurting,” Zebley said. “We all experience rising prices in almost every area of our lives, including the cost of owning a home.”
Real estate prices continue to rise, and homes are often being sold for prices well above list price, he said. It’s not uncommon for homebuyers to make it all the way to the settlement table and then have to pay an extraordinary lump sum tax payment that wasn’t factored into their budget.
“This tax is unfair and a burden on our people and our economy,” Zebley said. “We can’t solve a lot of the problems that our families face, but we have the opportunity to solve this problem now when our state budget is strong.”
Briggs King, who is running for re-election unopposed, said she will continue to fight for this and other tax cuts at the next General Assembly.
“I would prefer to eliminate taxes if possible or review certain taxes, like the gross receipts tax which is very confusing and unfair to business,” she said. “We also have one of the highest income tax rates in the country.”
“We are always looking to provide taxpayer relief and will continue to do so,” she said.
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.