Another New Tax? Not if Amendment 3 Passes!

The November 2, 2010 election is less than 35 days away.  Many are looking forward to sending Washington a message and a new composition to Congress on that day! Here in Missouri, several issues will also be on the ballot.

Yesterday, I wrote about Proposition B and the fact that while there are a lot of good intentioned people supporting it, United for Missouri recommends a NO vote on November 2nd.

The “transfer tax” we have already had imposed on us by the current administration and Congress is bad enough.  Some good folks here in Missouri are working to make sure we don’t see a transfer tax on real estate in our great state!

Amendment 3 is designed to prevent any transfer tax, including a sales tax, to be placed on real estate transactions.

The official language for Amendment 3 is:

Official Ballot Title:

Shall the Missouri Constitution be amended to prevent the state, counties, and other political subdivisions from imposing any new tax, including a sales tax, on the sale or transfer of homes or any other real estate?

It is estimated this proposal will have no costs or savings to state or local governmental entities.

Fair Ballot Language:

“yes” vote will amend the Missouri Constitution to prevent the state, counties, and other political subdivisions from imposing any new tax, including a sales tax, on the sale or transfer of homes or any other real estate.

“no” vote will not change the Missouri Constitution to prevent the state, counties, and other political subdivisions from imposing a new tax on the sale or transfer of homes or any other real estate.

If passed, this measure will have no impact on taxes.

Here is an on-point quote from Amendment 3 literature:

With big state and local government deficits caused by wasteful spending, politicians are looking for new revenue sources. Enough is enough when it comes to taxes. We already pay sales taxes, income taxes, personal property taxes, and many other taxes and fees.

Missouri is one of 13 states that does not levy any form of transfer tax on real estate transactions. All eight of our neighboring states levy some form of a transfer tax at some level of government.

The backers of Amendment 3 are correct in recognizing that a transfer tax is a  “convenient” potential source of revenue for state and local governments.  In lean times, we know government is looking for more money to spend.  Many governments make some cuts but are loathe to really take the opportunity to restructure that is being presented to them.  Instead, some make unnecessary, dramatic cuts in order to create a “crisis” to justify seeking more money from taxpayers.  Just ask the folks in Neosho!

Fortunately, here in Missouri we have the Hancock Amendment in our state constitution, which affords some very good taxpayer protections.  You know the Hancock Amendment is working well as almost every big government or growth in government proponent hates it!

In the case of a transfer tax, the legislature could enact one without a vote of the people as long as it did not exceed a certain threshhold, currently around $90 million.  If it exceeded the threshold, it would require a vote of the people. Local governments cannot enact one without legislative authority and would require a vote of the people.  Amendment 3 would prohibit all the forgoing scenarios and then some!

I haven’t heard a great deal of push back on Amendment 3.  It could be that big government supporters are too busy trying to convince people that letting voters decide on an earnings tax is a bad idea.

Amendment 3 is a preemptive strike against an attractive to big government tax.  United for Missouri supports the fact that state and local governments should be prohibited from levying a transfer tax.  We recommend YES on Amendment 3!

Carl Bearden
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8 Responses to “Another New Tax? Not if Amendment 3 Passes!”

  1. Brett says:

    I might be wrong, but reading the amendment language, doesn’t that complete bar the Fair Tax from being implemented?
    I don’t think I can support a Constitutional Amendment that would be a barrier to implementing the Fair Tax.

    • Carl Bearden says:

      Amendment 3 would not prevent the Fair Tax from being implemented. It would prohibit taxing new homes. That component in Missouri makes up a small part of the pot.

      • Brett says:

        Using the Show-Me Institute’s figure of $8.204B per year in new home sales in Missouri and a 7% rate to implement the fair tax, that’s $574M a year. That is only 6% of the total revenue, but it also is not an insignificant amount. That would require bumping the tax rate up to just over 7.9% to make up the difference. (Or with whatever the actual rate has to be, you are losing 6% of revenue by exemption home sales, which would require a pretty significant bump in the tax rate; and the rate itself is the biggest obstacle to implementation.)

        • Carl Bearden says:

          Brett,

          The Show-Me Institute numbers are not the baseline used for the 7% rate development. We are getting an update on FY2010 numbers as quickly as we can. As soon as we get those, we will be updating the calculations with and without new home sales.

          Thanks for your interest.

        • Carl Bearden says:

          Brett,

          A little update on numbers. The Bureau of Economic Analysis data update will be available very soon. However, I can tell you that the impact of the sales tax on new homes prohibition in Amendment 3is less than .02% using the existing data.

          Since the sales tax rate needed was under the cap of 7% established in Senate Joint Resolution 29 by significantly more than .02%, Amendment 3 poses no fiscal problem.

          The fact that an exemption is created for new home sales is a problem for some. Anyone who thinks that an exemption free measure will pass is going to be disappointed.

          • Brett says:

            Thank you for the work on that. I really do wonder if the Realtors are targeting an eventual Fair Tax just as much as a transfer task. Since rental housing would still be taxable, and now both new housing and existing housing would be tax free, that creates a very strong pull on housing versus a push on renting.

            Prop 3 looks like a forgone conclusion, so I guess we can wait for the new Bureau of Economic Analysis numbers and move from there.

            I think my biggest concern stems from my belief that the property tax lock in for owner occupied housing built into California’s Prop 13 created a similar push there (though offset somewhat by rent control in some major cities). Although there were many factors in the enormous real estate bubble in California, that high tax rent low tax ownership push-pull in California was certainly a big one.

  2. Pat says:

    I think I’m confussed…Is “Ammendment 3″ actually about “transfer tax”, or “road repair” tax???? I believe some of the wording of these “Ammendments” are to confuss us, then we CANNOT make heads or tails of what you are really asking for. I get on here to try to understand, and I’m lost…..MAKE UP MY MIND!!!…..

    • Carl Bearden says:

      Pat – maybe I missed something but Amendment 3 has nothing to do with roads or road taxes. It deals with transfer taxes and sales taxes on homes, prohibiting both.

      We will have another posting on Amendment 3 soon. Some of my Fair Tax friends are concerned about Amendment 3. We will talk about some of those concerns.

      Thanks for reading the blog.