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Surrounding states impose forms of real estate transfer taxes

Missouri has no such tax; ballot measure intends to keep it that way
Tuesday, October 26, 2010 | 8:11 p.m. CDT; updated 11:58 a.m. CDT, Wednesday, October 27, 2010
While Missouri does not impose transfer taxes, 37 other U.S. states do. These include many of Missouri’s neighboring states, which impose the tax at various rates, earning a range of revenue.

COLUMBIA — Missouri voters will get to decide next Tuesday whether they want to amend the state constitution to prohibit a form of tax that every surrounding state imposes.

Amendment 3 would prohibit the state from imposing any form of real estate transfer tax, essentially a sales tax imposed every time a property changes hands.

Ballot language

The specific language of Amendment 3 as it appears on the ballot:

“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?”


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Kenney Hubble, president of the Columbia Board of Realtors, said it's important to prevent double taxation.

“A transfer tax is nothing more than an additional tax we already pay through property taxes,” he said. “Amendment 3 gets the word out to say to Missourians that we have the opportunity to protect our homes.”

About 250,000 Missouri citizens signed a petition to place the amendment on the ballot, "and it's the citizens that will pass it by voting yes," said Elizabeth Mendenhall, president of the Missouri Association of Realtors. She cited the Vote Yes to Stop Double Taxation Committee's poll that indicated 70 percent of Missourians are inclined to vote yes on Amendment 3.

Missouri is one of 13 states that do not impose transfer taxes. Every state adjacent to Missouri imposes some form of tax on real estate transactions.

Iowa uses revenue stamps, which are stamps placed on the deeds when the transfer is recorded, to implement its transfer tax. This brings in about $15 million per year. That's about one-quarter of 1 percent of Iowa's $6 billion in annual revenue.

“As a revenue source, it’s not very important,” said Dale Hyman, administrator of property tax for Iowa. “As a source of accuracy and value assessments, based on market value of property, transfer taxes are important.”

Revenue stamps make the transfer of real estate a public record, creating a database for modeling the assessment of similar properties. Revenue stamps give Iowa a way to enforce the declaration of value, he said.

Nebraska for most of its history has used a documentary stamp tax to generate revenue, Nebraska Department of Revenue spokeswoman Deepa Buss said. The stamp is placed on the deed when it is filed.  The revenue from the tax is usedto fund grants for affordable housing, homeless shelters and behavioral health programs.

The total documentary stamp tax is $2.25 per $1,000 value of the subject property. The state of Nebraska gets $1.75 per $1,000 value, and counties get 50 cents.

The state 's share totalled $10.9 million during fiscal 2010, said David Dearmont, chief economist for Nebraska Department of Revenue.

Kansas has a mortgage registration fee that is 26 cents per $1,000 of mortgage. Counties collect the tax, and it is mostly used at the local level, Kansas state budget director Duane Goossen said.

The Kansas Heritage Trust Fund, which promotes the preservation of historic buildings, receives about 4 percent of the revenue that comes from the mortgage fee transfers. The rest goes to county governments and general funds, he said.

Tennessee imposes a transfer tax of 37 cents per $100 of value of the property transferred. Less than 1 percent of tax collections come from transfer taxes, Tennessee Department of Revenue spokesman Sara Jo Houghland said. Tennessee distributes the proceeds of the tax to various state and local funds, she said.

The realty transfer tax was first imposed as part of a larger bill in 1937, during the midst of the Great Depression. In need of new sources of revenue, Tennessee imposed a tax on numerous transactions and activities, Houghland said.

Despite the popularity of transfer taxes in other states, Rep. Mike Sutherland, R-Warrenton, said he thinks it's unlikely Missouri would go that route, even if the amendment fails. Sutherland is chairman of the General Assembly's Joint Committee on Tax Policy.

“To me (a transfer tax) would be a bad idea,” he said. “It would make it harder to buy a house and harder to sell a house.”

R. Wilson Freyermuth, John D. Lawson professor of law at MU, said Amendment 3 calls for questionable policy.

“As a policy matter, if it is approved, it just ties the hands of state and local officials in terms of the types of taxes they can use to raise the revenue needed to maintain existing public services,” he said. “The need is still going to exist.”

Freyermuth also said that the tax limitations already imposed by the Missouri Constitution make it improbable that a real estate transfer tax could be imposed without a popular vote.

“I don’t see a need for (the amendment),” he said.


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