Debunking Santa Fe’s Proposed Real Estate Transfer Tax

Residents of Santa Fe will vote next spring whether or not to impose higher taxes. According to the New Mexican, the tax would work as follows:

When a house is sold for more than $750,000, the buyer would be responsible for paying a fee that represents 1 percent of any amount over $750,000. For example, a house sold for $800,000 would owe $500. Revenue would go to the city’s Affordable Housing Trust Fund and would be earmarked to help increase home ownership among the city’s work force and for other housing needs.

Supporters claim the tax is needed to curb the economic and social consequences of the migration of the city’s workers to less-expensive nearby communities while earning wages in Santa Fe. In other words, Santa Fe is too expensive for many middle-income people to live in.
Of course, at a time when politicians are hoping to raise taxes, the fact that Santa Fe’s tax burden has gone up dramatically in recent years is conveniently ignored.
Residents of Santa Fe have seen their gross receipts rates climb more than 25 percent from 6.3125 percent back in 1999 to the current rate of 7.9375 percent. Of course, property taxes and hotel taxes have also risen in the last several years.
This doesn’t even address the impact of the proposed real estate transfer tax. Thankfully, the Texas Association of Realtors has done a useful analysis of the negative economic impact of real estate transfer taxes. The vote isn’t until March, but look for more on this from the Rio Grande Foundation.