Homeowners and those who dream of owning a home take heed.  During the 2008 legislative session, New Mexicans will have the opportunity to protect the value of their home and keep homes affordable.   Senator John Grubesic has introduced legislation to protect New Mexico homeowners’ investment in their homes.  If passed, the new law will prevent local governments from levying a home excise tax (a sales tax collected on the sale of every home). 

Home excise taxes are just another tax on New Mexico homeowners that will penalize them for buying and selling their home.  If the tax is paid by the buyer, the home tax could force homebuyers to come up with additional cash at closing and make qualifying for homes more difficult.  In fact, by adding these unnecessary transaction costs they disproportionately affect low-income workers, working families and first-time homebuyers, essentially hitting those with the least amount of disposable income the hardest.  

New Mexico has already recognized that home taxes are excessive by passing legislation to keep property taxes low.  So the home excise tax would be a new tax in addition to property taxes that are already paid annually to local governments.  This amounts to double taxation and would add another tax burden to homeownership.  If the tax is paid by the seller, the home excise tax would rob New Mexican homeowners of the equity they have built up in their homes for other important uses like college tuition, home improvements or retirement.

Fortunately, a new state law has been proposed by the New Mexico legislature that can prevent local governments from imposing a home tax.  The new law will help protect your home’s value. 

Without the protection of this legislation, an excise tax could be imposed on every sale of real estate in many cities across New Mexico.  For example with a 1% home excise tax levy - for every $100,000 of a property subject to the home excise tax, the local government could assess $1,000 in taxes.

The new law will keep New Mexico home ownership in line with our neighbors. Our neighbor states, Texas and Utah, have no transfer tax.  Arizona has a nominal $2.00 fee per deed or contract.  Colorado has a .01% transfer fee and Oklahoma has a .15% transfer fee.  Only twelve states in the nation allow local jurisdictions to tax real estate transfers.  States with high taxes can also be at a disadvantage when trying to attract new, beneficial economic interests that bring new jobs.

And it’s simple economics that you can’t tax something and make it more affordable.  Some local governments argue that they intend to use the new tax funds to support laudable affordable housing programs.  But there are many more effective ways to support and fund affordable housing programs. 

In reality, real estate taxes are dream breakers for our children and grandchildren who will be the ones most hurt by this tax increase as they unable to find affordable homes over time.  Now is the time to stop the home tax in New Mexico for good.