Debunking the 3.8% Real Estate Tax

I got an email this morning from a well meaning associate about a draconian tax on real estate transactions supposedly due to start in 2013, and of course the editorial message of the email decries President Obama, Speaker of the House Pelosi, Harry Reid,and the rest of the Democratic leadership. The email has an image of a newspaper story from a paper I never heard of (The Spokesman-Review of Spokane, Washington) which must be included, I guess, for legitimacy.  No liberal am I, but if we are going to decry any politician on the right or left, I think it should be for something that is true. 

Here is the link to the Snopes.com entry on the email, which specifies that there will be no 3.8% tax on real estate transactions in 2013 or any other year for that matter. A federal tax on transactions in this age of short sales and negative equity would result in the storming of the Bastille and is antithetical to anyone who wants to remain in office. You just can’t do it. Guess what? They aren’t. 

Currently, New York state has one of the absolute highest transfer taxes in the nation: .04%, or $1,600 on a $400,000 sale. Yes: less than half of 1%. For the federal government to impose a tax that is on a scale of a real estate commission it would mean they are increasing the New York transfer tax by almost tenfold. Absurd, and untrue.

Snopes indicates that a tax is proposed on high earners on investment income over extremely high thresholds, I wouldn’t be in favor of that tax either, but if you are selling your $250,000 home in Pflugerville or Shamokin, you will not have to pay Uncle Sam an additional $9,200. 

Update: The National Association of REALTORS has published clarification on why the myth is misinformation.