Why a “Land Transfer Tax” instead of other revenue sources?

The North Carolina legislature gave the counties only two new revenue options: increase sales tax or approve a LTT. Sales taxes are regressive, harming our citizens who are least able to afford the necessities of life.

Who authorized the BOCC to put this on the May ballot?

The BOCC could have waited and put the tax referendum on the November ballot, or they could have done nothing, ever. Doing nothing would not solve the schools funding problem and delaying would have cost potential tax revenue that is urgently needed.

Why not raise the Sales Tax instead?

Sales taxes are an immediate, small burden on all Orange County citizens. Even though the allowable increase would not add to food costs, it does add to the overall cost of necessities that weigh on a families’ day-to-day budget. For families already feeling stressed, why make it harder for them to get by if there is another way?

Why not increase the Commerical Development in Orange County to raise more tax revenue instead of a Land Transfer Tax?

Our County is adding new commercial development quickly, but that alone will not pay for the new schools the County is obligated to build. Our County has resisted going the way of Wake County, where rampant commercial growth generated non-residential tax revenue but diminished the quality of life that, by contrast, make Orange County so attractive to live in. The Buckhorn retail development and the 6+ million square feet of commercial space available south of Hillsborough ought to significantly add to the county’s tax base, and other commercial development will emerge in the near future.

Who will pay this tax and are some property transfers exempt from this tax?

When property is sold the transfer tax will be paid. Unless the property is deeded to heirs or given as a gift the tax will apply.

When will this tax be paid?

This tax functions as a county excise tax and becomes part of closing costs at time of sale. Historically, closing costs are negotiated between the seller and the buyer. Technically, the seller writes the check for the taxes, but funds may specifically be allocated by the buyer for this purpose.

Where will the revenue obtained from the tax be used?

Existing and future planned school and park projects are eligible for transfer tax funds.

Why can’t we lower the county expenses and thereby eliminate the need for more revenue?

The County operating budget meets the needs for maintaining services the community requires to run smoothly, but in no way could the County meet its capital needs by skimping on services. Capital needs, like new schools require large sums that are obtained by issuing bonds. Currently, the County has reached its self-imposed borrowing limits, but still has necessary, unmet needs for schools and parks. The County’s prudent use of funds enables it to keep its AAA bond rating and thereby is eligible for the lowest available interest rates.

Will this new tax eliminate the need to increase other taxes (sales tax, property tax) in the future?

It definitely eliminates sales and property tax increases to meet essential County capital improvements. However, it does not eliminate the potential for other tax increases in order to meet the County’s operating budget.

Will this tax reduce the need for Orange County to borrow money (Bonds) for infrastructure expansion/improvements in the future?

Yes, this transfer tax does enable Orange County meet infrastructure needs that would otherwise require new bonds.

Why does creating a new tax, the Land Transfer Tax, make more “sense” than either of the alternatives of increasing the real estate property tax or increasing the sales tax?

Property values have risen in the County because the County’s excellent schools and quality of life attract and retain residents who value living here. This tax enables property owners to enjoy increases in value of their property as long as they own it without having to pay additional yearly property taxes. At the time of sale a tiny portion of the accrued value is paid as the transfer tax. This tax is a form of “property enhancement investment” that
adds value to property, or in the worst economic times, retains value of Orange County properties.

What are the “long term” benefits of having a “Land Transfer Tax” versus other ways (Increased real estate tax, increased Sales Tax) to raise revenue?

Since the tax expense is deferred until time of sale, property owners get to keep their money longer while their asset grows. It’s an economically smart strategy to get long-term benefits before paying for them.

What are the “short term” benefits of having a “Land Transfer Tax” versus other ways of raising revenue?

Since Orange County is obliged to raise revenue to meet unavoidable expenses, taxpayers are asked whether they want everyone to pay something daily or yearly, or, instead, defer paying a tax until a time of property sale. Taxpayers retain potential sales or property tax money to use at their discretion, while their property investment grows, or in the worst economic times, retains maximum value. The transfer tax, paid out of the proceeds of a property investment, may, in many cases actually be paid by the property buyer.

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