Evanston considers increasing Real Estate Transfer Tax:

This past Monday Evanston's aldermen opted to send the propsal for an increase in the real estate transfer tax to the city's voters. A transfer tax is a fee imposed on a property owner, in Evanston, when he sells his property. This fee is currently $5 per $1,00o and could rise to $6 per $1,000. The proposed increase is one means the City has identified as viable to help fund an Affordable Housing initiative. Below you will find some background information on the real estate transfer taxes as well as an issue statement (source: Illinois Association of Realtors) that was emailed to real estate agents this past week:

Background:

"Home rule municipalities (those municipalities with a population over 25,000) are permitted to enact a real estate transfer tax which is a tax imposed on the seller or buyer of real property at the time of the [property] transfer. Usually, the tax is based on the sales price. In most cases, the seller is responsible for the payment of the tax although some municipalities(including Chicago) require the buyer to make the tax payment. The average local transfer tax in the Chicago area is $5 per thousand of the sales price of the property. As an example, a $5/$1,000 transfer tax on a $200,000 home would be $1,000. The highest local transfer tax is $10 per thousand. (The transfer tax payment is not deductible on state or federal tax returns.)

All counties in Illinois are permitted, under state law, to impose a 50-cents-per-thousand transfer tax. In 1997, the General Assembly enacted a law which requires home rule municipalities to hold a public hearing on any proposal to increase an existing transfer tax or impose a new transfer tax. In addition, voters in a municipality must approve the tax increase proposal in order for it to go into effect. "

IMPLICATIONS:

The transfer tax is another cost borne by the property owners who already carry an excessively high portion of the tax burden. After years of paying property taxes to fund local government, a homeowner is required to pay another property tax simply because he or she is selling the home. The tax is especially burdensome on homeowners struggling to work their way up the housing ladder as it further erodes the equity they may have when they sell their home. One of the chief obstacles to homeownership for working families is the total amount needed for the downpayment and for closing costs. When the transfer tax is assessed on the buyer, that tax only makes that obstacle that much larger.

This is a link to the Evanston Review article on the City Council decision.