Having backed successful campaigns in at least four other states, Realtors are shelling out nearly $6 million in the hopes of banning real estate transfer taxes in Oregon through passage of a constitutional amendment that’s been panned as a "carve-out" for a single industry by another business association that opposes it.
There are currently no real estate transfer taxes in Oregon, except in Washington County, which imposes a 0.1 percent transfer tax, or $200 on a $200,000 home.
Under current state law, no local government may impose taxes or fees upon the transfer of real estate between parties. Realtor groups argue, however, that the state Legislature has the authority to impose such taxes and fees and to change the current ban on local governments imposing transfer taxes should it have the votes to do so.
Measure 79 would prohibit real estate transfer taxes at the state level as well as the local level (with the exception of the Washington County tax already in place) and write that prohibition into the Oregon Constitution, thereby removing the Legislature’s authority to impose transfer taxes in the future.
The National Association of Realtors has contributed more than $3.3 million in support of the controversial ballot measure, with the latest infusion, $1.3 million, occurring at the end of September, according to public records.
A few days later, the Oregon Association of Realtors contributed $700,000 to the campaign, known as "Yes on 79" and "Protect Oregon Homes 2012," bringing the trade group’s total contributions to more than $2.4 million.
"We are beginning to see a flicker of life in the real estate market in Oregon. All we need is yet another tax or regulation from the government on some level to stomp it out. A robust real estate market has led us out of six of the past eight recessions. It will again, as long as we work on it from all levels — local, state and national," said John Wallace, CEO of OAR.
Due to the economic downturn, many state and local governments are "starving for cash," Wallace said, "and there are only so many couch cushions to look under for a bit more change. Many municipalities in Oregon are on life support. They need more revenue or they will need to make deeper cuts."
"And we can’t afford to take that gamble, given the current economic environment. We feel for those municipalities. In fact, our Realtor members live in those municipalities. But Oregon property owners already pay some of the highest real estate property taxes in the country. And we don’t feel it is prudent to risk another tax on real estate — and the harm it would cause to real estate buyers and sellers and the entire real estate market."
Realtors receive no direct benefit from the millions of dollars being spent on this campaign, Wallace said.
"Certainly, there is an indirect benefit to Realtors, just as there is an indirect benefit to society as a whole — anything that improves homeownership benefits society. But the real winners in this battle are the property owners — both current and future — in the … state of Oregon," he said.
Opponents to the measure say a constitutional amendment is not needed, will tie the hands of future legislators to adapt the revenue system to future needs, and is written so broadly that legislators won’t even be able to levy a real estate transfer tax on multimillion-dollar development deals.
In an editorial, The Oregonian called it "a solution in search of a problem" and said "opposition to a specific tax is no reason to clutter the Constitution."
"Backers of Measure 79 want to place a ban in the Constitution in case the Legislature changes its mind. The subject has come up in most legislative sessions over the past decade, they say. But legislators discuss lots of things that don’t become law. It’s part of their job," the paper said.
"Passing this ballot initiative would make it more difficult for the Legislature to do its job. Specifically, it could reduce the chances of solving tax problems that actually exist."
Nik Blosser, chair of the Oregon Business Association, which opposes the measure, told The Oregonian that a "carve-out" for one industry is "absolutely the wrong way to start discussion" on tax reform.
An August poll conducted for Our Oregon, a labor-backed group that opposes the measure, read voters the measure’s text and asked for their opinion. Only 22 percent said they would vote "yes," while 57 percent said they would vote "no."
Joe Molinaro, managing director for community and political affairs at NAR, told Inman News transfer taxes are a barrier to homeownership, particularly among first-time buyers.
"We’ve had a long-standing policy against transfer taxes because they place a burden on homebuyers and because the taxes" can be an additional payment the buyer has to make on top of a down payment and other costs at closing.
Molinaro manages NAR’s Issues Mobilization Program, which distributes funds to state and local associations for local campaigns.
Similar efforts in other states
Over the past few years, NAR and state-level Realtor associations have successfully spearheaded campaigns for constitutional amendments banning real estate transfer taxes in at least four other states: Arizona, Missouri, Montana and Louisiana. Molinaro said he did not have any reliable data on how much NAR contributed to the campaign in Arizona, but said the trade group contributed about $1.9 million to the campaign in Montana, about $2.8 million in Missouri, and $962,000 in Louisiana.
Voters approved the constitutional amendments in Arizona in 2008, in Montana and Missouri in 2010, and in Louisiana in 2011. All passed with at least 70 percent of the vote.
Molinaro said NAR had pushed for constitutional bans because "that’s about as permanent as you can make it."
"Once you have a constitutional amendment, then the state Legislature cannot just pass a bill imposing a tax. Making a change to a constitution is a difficult thing," he said.
A constitutional amendment also means local Realtor associations no longer have to spend time and money opposing any attempts to enact a real estate transfer tax, he added.
"If every year the legislature tries to impose such a tax, then every year you have to put together a campaign. So this is an attempt to be more proactive and get ahead of the issue," he said.
Attempts to impose Oregon transfer tax
There have been several bills in the Oregon Legislature that have tried to impose a transfer tax in past years, though there have not been any such pending bills this year, he said.
OAR’s Wallace did not give a dollar amount for how much such local yearly campaigns cost, but said there were several factors to consider.
"First is the cost associated with keeping the Oregon Legislature from either lifting the moratorium on transfer taxes, or of imposing their own. While there is no good method of nailing a firm number down on this, one only has to look at the staff makeup of OAR to get an idea of the importance we place on governmental affairs. Out of a staff of 12, we have three full-time GA staff positions, plus a major contract lobbyist, and other staff with responsibilities that include GA items," he said.
"So, out of a staff of 12, we have … almost half the staff, plus a contract lobbyist, involved with governmental affairs, and tasked with issues such as fighting adoption of transfer taxes. Add to that the hours invested by the volunteers and you get an idea of what it costs to keep things like transfer taxes from harming property owners and/or prospective property owners."
In addition, should Measure 79 fail and the Legislature at some point decide to remove the ban on local governments, "Realtors will be tasked with attempting to stop the tax from being enacted" at every local government level, including city, county and district, Wallace said, to avoid what he called a "layering effect" of transfer taxes imposed at multiple levels of government.
"And then — should they fail — they would have to mount referendum campaigns in each and every locale that enacted such a tax," he said.
In 2011, OAR imposed a $75 special assessment on its 14,000 members to support Measure 79. The assessment was originally slated to be in effect for three years, but was cut down to one year after the Oregon attorney general’s office objected to the assessment’s use for political purposes, particularly when any Realtor who did not pay would no longer be considered a member of the association and therefore no longer have access to the local multiple listing service.
In a January 2011 letter, the attorney general said OAR was violating the state’s "undue influence" law "by requiring members to contribute to a fund used for ballot measure campaigns at the risk of harm to their employment."
The Oregon attorney general later allowed OAR to continue collecting the assessment, but only during a signature-gathering effort not technically considered a measure campaign. OAR later chose to discontinue the assessment for 2012 and 2013 "because of semantics," Wallace said. "The (attorney general’s) office wanted to add guidelines and limitations to what we had chosen to call a ‘special assessment.’"
NAR dues increase for political activities
At the national level, last year NAR approved a $40-a-year dues increase to fund political activities, promising that about two-thirds of the $42 million in additional annual dues it expected to raise each year would be spent at the state and local level.
According to Molinaro, the only other proposed constitutional amendment NAR is involved with this year is Amendment 4 in Florida. The amendment would lower property taxes for first-time homebuyers and put a lower cap on property taxes for "nonhomestead" properties, which include second homes as well as commercial and investment properties.
"It’s important in Florida because a lot of the second-home buyers are people from out of state and under the present system they often end up paying more in property taxes than people who live in Florida," Molinaro said.
"So the concern of the Florida Realtors is that high property taxes may be discouraging people from other states from buying second homes in Florida."
He said the Florida Realtors association in Florida had asked for NAR’s assistance.
"They initiated the campaign and are putting quite a bit of their own money into it. NAR has contributed $1 million," he said.
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