RALEIGH – If there is any better example of the worst excesses of the state political debate than the months-long assault against the North Carolina Association of Realtors, it’s just not coming to me.
The issue at hand is a proposal to grant statewide authority to impose a new local tax on the sale of real estate. Now, as tax policy, the proposal is nonsensical. It narrows the base of taxpayers expected to finance new schools and other public services, even though most tax-policy specialists properly advocate a broader tax base. It promises to substitute a tax on property transactions, which is not deductible on the federal income tax, for increased property taxes, which are. And it reduces the transparency of local government by hiding some of its cost under mountains of paper at real-estate closings that most folks won’t routinely see, instead of presenting them clearly to taxpayers in an annual bill.
As a tactic of demagoguery, however, the transfer-tax proposal is golden. Its policy liabilities become political assets. Rather than making a straightforward case that taxpayers aren’t paying enough into local government to fund necessary services, transfer-tax proponents promise to single out two suspect classes – fast-talking real-estate agents and rich out-of-towners – who will be made to pay instead. Perhaps they should just use the term kulaks and be done with it.
Furthermore, in a move of audacious if hypocritical political jujitsu, tax advocates have proposed that the taxing authority be predicated on a public referendum in each community – and then attacked the Realtors for being anti-democratic. Please. The transfer-tax cabal consists largely of lobbies that vociferously oppose the public’s right to vote on many critical issues.
They constantly seek to evade the constitutional requirement that voters be asked to approve major issuances of government debt, urging instead the use of certificates of participation, special-obligation bonds, and other tricks. They pushed for the passage of Amendment One, using misleading ballot language and a multi-million-dollar campaign to strip North Carolinians of the right to vote on tax-increment bonds. They want to keep North Carolina’s forced-annexation law, which is one of the most hostile in the nation to the concept of giving citizens a say. They oppose legislative approval for a referendum to allow North Carolinians to amend the state constitution to protect against eminent-domain abuse. They are furious at the prospect of upcoming referenda in Charlotte on the transit tax and in Greensboro on the recall of a controversial politician. They detest the idea of giving North Carolina citizens the right other Americans enjoy to initiate public referenda on such issues as tax and expenditure caps, term limits, and racial-preference bans.
In short, the newfound affinity of the N.C. League of Municipalities, the N.C. Association of County Commissioners, and their allies for the public’s right to vote is as phony as a three-dollar bill. It’s as phony as Randy Parton’s musical genius, which now that I think about it is worth far less than a three-dollar bill.
Another act of breathtaking chutzpah was to claim that the N.C. Association of Realtors was a big, bad lobbying monster up against a ragtag fugitive fleet of scrappy public-interest advocates. Hold the Lorne Green audio clip, okay? The Realtors are a major force on Jones Street and in state politics, but the political forces arrayed in favor of the transfer tax are numerous, skilled, and well-financed, representing much of the political establishment of North Carolina. That establishment firmly believes several related propositions: 1) North Carolinians are significantly undertaxed, 2) the result is that North Carolina governments have billions of dollars less than they need each year to deliver adequate public services, and 3) public opposition to higher taxes and fees, a result of ignorance and greed, must be circumvented through well-crafted propaganda and subterfuge (though their choice of terminology would be less stark). That’s why the transfer tax is so attractive – it appears to offer something, more government services, for nothing, because only greedy Realtors and Yankee newcomers will pay.
(The reality, by the way, is that communities with transfer taxes don’t get lower property taxes as a result. They just bear a higher total tax burden. You don’t get one instead of the other. You get both. This outcome should surprise no one, because the advocates are mainly trying to boost government spending, not reshuffle the tax code. They don’t much care about the structure, economics, and fairness of the tax code. They care about collecting as much revenue as possible without angering the public so much it votes them out of office.)
The collective annual budgets of these pro-transfer tax, pro-debt lobbies are in the many millions. Their 2007 lobbying expenses to date exceed those of the Realtors (though keep in mind that both sides are lobbying on other issues, too). As soon as one side in a political debate starts reeling off conspiracy theories and fulminating about the other side’s finances, that’s a clear sign that it can’t defend its position on the merits.
I feel for them. The transfer tax is impossible to defend on its merits, which largely involve fooling and swindling the taxpayers of North Carolina.
Hood is president of the John Locke Foundation.