Emeryville voters shouldn’t let the city take the equity in their property
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When you sell your house in Emeryville, the city takes 1.2% of the selling price. They call it a transfer tax. So, for example, the owner of a $500,000 property pays the city $6,000 when the proceeds leave.
This is legalized equity theft. It’s one thing for cities to levy annual taxes for the services they provide to businesses and residents. It’s another when they take a large part of the owners’ equity when they move, when they no longer use the municipal services that transfer the tax fund.
Out of 482 cities in California, only 10 loads transfer tax rates that match or exceed those of Emeryville. And now, with Measure O in the Nov. 8 ballot, Emeryville officials want voter approval to take an even bigger cut to the sale price of the property.
For certain sales, the Emeryville transfer tax would be the The highest in California. The townspeople should not let this happen. They should reject measure O.
Under state law, property owners in California cities pay a small county transfer tax of 0.11% of the sale price. Counties generally share proceeds with cities.
But cities that operate under their own charters, as opposed to general laws set by the state, can add their own transfer taxes with majority voter approval. The 26 charter towns that have done so have much higher total transfer tax rates — up to 15 times higher than the county’s standard rate. Emeryville is already one of the worst.
The current rate of 1.2% in Emeryville applies to all properties, regardless of the sale price. Measure O would increase the tax to 1.5% for properties that sell for between $1 and $2 million and 2.5% for properties that sell for more than $2 million.
Statewide, according to March data from CaliforniaCityFinance.com, only Albany, Berkeley and Oakland charge that much on a $1 million sale. And Emeryville’s proposed rate for properties between $2 million and $3 million would be the highest in the state. At $3 million, Culver City would have the highest rate.
Taxes are generally split between buyers and sellers of goods. For buyers, that means more money they have to borrow to finance their home. For sellers, transfer tax is subtracted from the hard-earned equity after paying off their mortgages. That’s less money for the down payment on the next home or for retirement savings.
City council members say the record rate of 2.5% in Measure O for sales over $2 million is intended to ensure that large commercial properties pay a fairer share of city services. It’s wrong. You don’t buy large commercial properties for as little as $2 million.
Instead, as property values increase over time, higher transfer tax rates will attract more middle-class homeowners. This is because the $1 million and $2 million tax rate thresholds are not indexed for inflation.
Moreover, tax rates are not marginal. This means, for example, that a house that sells for $999,999 will be taxed at a rate of 1.2%, or just under $12,000. But a home that sells for $1 million will be taxed at 1.5% for the total value, not just the amount over $1 million. So in this example, this $1 increase in the sale price would increase the transfer tax to $15,000.
Apparently the purpose of Measure O is to raise more money for the city’s general fund. There are fairer ways to achieve this while still maintaining a progressive tax structure. For example, the city could charge a parcel tax for existing owners based on square footage.
But charging homeowners as they leave town is just plain wrong. Emeryville’s current transfer tax is legalized equity theft. Measure O would only make things worse. Vote no.