State Taxes!!

[Wuptdo]

While driving through last weeks storm on I-95, I was listening to some "down east" talk radio. Now that the elections are over the truth comes out; the State is looking at a one Billion (plus) dollar shortfall the next fiscal year.
Gov. "Tax Hike" Weasly wants the State to look at taxing "services" to make up the revenue shortfall (funny, why don't they just cut funding instead). The first three on the list will include: landscapping, accounting, and either automative or painting (was a little distracted at this point). Will comb thru a weeks worth of N&O's to see if there is anymore data on this.

Now, if I was looking for new revenue to tax it would be: 1% New home fee (statewide and include trailers), Lawyers fees (can't charge back to customers), and Real Estate commisions. :-D

This will be interesting to watch.

Wuptdo B-)

[washere]

Wup-
This idea has been discussed at length on the Federal level.

The consensus is that for a tax such as this to be feasible, you're really going to have to additionally tax every service.

The rationale for Tax Hike Mike's idea, is that what you're talking about taxing (ie, accountants, lawyers, etc.) is a luxury and so you'd be taxing the rich. The issue is all the people you catch in the net.

Look at it this way: you're not going to be able to tax real estate commissions more than they already are. Sorry. So tax the lawyers. I know you say that you don't want the tax to be allowed to be billed back to the clients, but there's no way to keep that from happening.

Lawyers will just raise their hourly rate/retainer fees. You can't regulate that.

So all that happens is that people will get screwed on the back-end.

Tax accountants? The only people that hurts is the lower class. Rich people need accountants. The middle class could find the money. Poor people need accountants and can't afford them as it is, much less if they cost more b/c of more taxes. The rest of us can come up with the extra money if we had to.

[Wuptdo]

CharChar -

Instead of looking for way to increase revenues, all governments should be looking at ways to reducing cost. Government is not the answer, and never should be.

How to tax Real Estate Commission (or fee):

$300,000 Home x 7% Broker Fee = $21,000

$21,000 x 5% State Service Tax = $1050

$21,000 x 2% County Service Tax = $420

Total Tax Collected = $1470

So now the broker collects $19,530, and as we all know, only "brokers" can collect fees. :wink:
With this type of service tax, only a few people are affected, and the tax is so low, they won't even noticed the difference. It works for me!

Now, what we really need in North Carolina is a lottery!

Wuptdo B-)

[washere]

I could go for the lotto thing. But I do need to respond to your broker money thing.

I have a house in Raleigh right now listed at ~$200k.

Now, I'm gonna use approx. numbers as a generalization of what a broker could expect to make on such a sale.

Take a 7% commission. That's $14K.

I get 4.4% selling agent gets 2.6%.

Then, I split my 4.4% ($8800) with my brokerage. If I split with my brokerage 50/50 (a pretty common split), I'm left with $4400.

If I'm affiliated with a national brokerage, I have to pay a brokerage fee on top of all that. Subract another 6% (I've seen as high as 12%) off my $4400 (leaving me with about $4100).

Now that looks like $4K pure profit to me. But it's not. I spend a heck of a lot of money marketing a house before I ever get paid. If the house doesn't sell (which isn't necessarily my fault, ie over-pricing, etc) I'm just out that money.

It costs TONS of money to run newspaper ads, magazine ads, print flyers (I always do full color), mail just listed cards, etc.

Not only that, I do most things myself, but the overhead of personal marketing, postage, my office fees (at least I get a really sweet corner office, most agents are stuck in bull pens or cube farms- I've seen monthly desk fees as high as $600 and as low as $150, although if you're consistently a top producer, you can negotiate having that fee waived or lowered), MLS, and E&O insurance is incredible.

I'd estimate that on a $200K transaction, the average agent would really only net about $2K-- before taxes. And that's if they can command a 7% fee in a market like this. 99.9% can't or won't.

Excellent point on only brokers collecting fees. I still haven't figured out why agents won't pony up the $400 to take the broker's classes. Getting an agent's license is tough. Once you've got that license, all you have to do is sit through a month of classes (I think it's 12 hrs/week) to get the broker's license.

[Wuptdo]

CharChar -

Interesting, but, do you think Joe Average taxpayer will care about "agent" commision split? Do you think that Joe A. will care about your expenses and all the other things you do to generate income? If I recall (old data), the average person will stay in their homes about 7 years. As a group, you are small, and you make lots of money. Joe A. won't care or mind that you are being "taxed" as it won't affect his bottom line on the sale of his home.

Using my math example ($300k) and your "splits" I figure that the selling broker will have their fee reduced by $647 due to the new tax. Now I would rather see this happen, than my taxes going up. So maybe it is not a bad idea to tax services of the "rich" (real estate, lawyer, accountant or medical).

Also, thanks for the idea. Here is another service we can tax - newspaper advertising. Once again, millions of dollars are spent on advertising. But 99% time, who really cares? Joe A. won't care as it becomes the cost of "doing business."

But what happens if everyone stops advertising in the N&O, and the N&O goes out of business. I'd say good-bye, good-riddence, and hope that none of the writers or editors is employed again in their field.

We must look for ways to cut cost first.

Wuptdo

[Wuptdo]

I noticed this subject is on the front page of Sunday's N&O. :roll:


CharChar - Joe would be proud of you! :D:

http://www.joegirard.com/



Wuptdo B-)

[washere]

Wup-
Watch my taxes and fees increase, watch me bill that right on back to you.

Actually, a tax like you're talking about won't hurt the big producing brokers.

Only 10% of brokers gross more than $100K/year.

The attrition rate in real estate is incredible. 75% quit the first year, and another 50% of the 25% left quit the year after that.

The people who really get screwed are the ones who can't afford the sky-high office fees, $350/year REALTOR dues, and the costs of doing business (ie, advertising) as it is.

Now what I could see, is that tax forcing all of the "small time" guys and guys who really can't afford to be in the business out of the business.

Then the rest of us could charge less and make it up in volume.

As it is, there are something like 14 THOUSAND people in Wake County with real estate licenses.

[Wuptdo]

CharChar wrote:

The attrition rate in real estate is incredible. 75% quit the first year, and another 50% of the 25% left quit the year after that.

Whoa. So let me get this straight. You take a class at Wake Tech, pass a state "exam," and pay various fees to join the "club." Then all you have to do is drive people around and show them houses, or sit in a model home and wait for people to come to you. Do some paperwork, hold their hands at escrow, and get paid big bucks. Though the "Brokers" are really making the big bucks. So why do so many want to leave? It seems like these 14 thousand people would be living the lifestyles of the "rich & famous."

Strange business. However, the purpose of this thread is to discuss how Gov. Weasly is going to stick us with new taxes to pay for his social welfare programs.

Wuptdo B-)

[washere]

WHile there may be classes at Wake Tech, most people go to private real estate schools and pay about $400 to take the salesperson class. It's another $400 for the broker class.

All the fees involved are precisely why people get out of the business. It costs A TON to get started ($800 for classes, $350 dues up front+$250 "application fee to join the club, office fees, etc.).

Most people in real estate aren't doing it as their primary career (like me for example). They've come from other fields, lost their jobs, decided to "make it big", etc.

Especially if you've quit or lost your job before making the switch you're screwed.

When you start, it's often awhile before you get your first listing. I came in with listings, but I was an unusual case. I just happened to have people lined up who wanted me to sell their houses. Then you've gotta sell the house, which could take months. Then you have to wait for closing, which could take months. Finally, you get your paycheck about a month after closing.

Realisitically, it could be 6 months before you ever get a paycheck. And that probably only covers the cost of entry at that point. I think the average net salary (before taxes) for a new agent is somewhere in the neighborhood of $8K for the WHOLE YEAR!

That's why people get out of the biz.

They have these dreams that they'll make a killing. They don't understand that they actually have to be proactive to meet people and get clients, or that it could be months before they ever do anything other than shell out the dough.

[washere]

But getting back to taxing luxury services as a stop gap measure for Weasly...


Ain't gonna happen, Wup. Not to the REALTORs anyway. We pay $350 a year to be sure of that. That, and like I said, the only people who get screwed by a "luxury tax" are the people who are the most strapped to begin with.