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Amendment 3 would bar Missouri from enacting a real estate transfer tax

This article first appeared in the St. Louis Beacon, Oct. 22, 2010 - The real-estate community is pushing an amendment to prevent any future taxes on the transfer of homes and other properties.

Voting "yes" on Amendment 3 would change the Missouri Constitution to bar any future implementation of a "transfer tax," a tax that a state collects when property changes hands.

No transfer tax currently exists in Missouri, but the Missouri Association of Realtors, the group sponsoring the amendment, doesn't want to let the state have any chance to create one. Elizabeth Mendenhall, president of the association, said 37 states have a transfer tax and she doesn't want Missouri to become No. 38.

The supporters view the transfer tax as a form of double taxation because homeowners already pay property taxes. The group's rallying cry: The measure "will keep the American dream of home ownership alive in Missouri," Mendenhall said.

Transfer taxes in other states range from as low as 0.01 percent of the property's price in Colorado to as high as 2 to 3 percent in Delaware and 4 percent in Pennsylvannia, according to the Federation of Tax Administrators. Most transfer taxes, though, are on the low end of the range, under 1 percent. A 1 percent tax on the transfer of a $200,000 home in Missouri would cost $2,000 upfront, and possibly more if the buyer has to fold the tax into a long-term loan.

Amendment 3's supporting committee has received healthy contributions from the state and national real-estate communities. In September alone, the National Association of Realtors gave $1.22 million and the Missouri Association of Realtors PAC donated $1.83 million, according to campaign finance reports. Then on Oct. 1, NAR chipped in an additional $1 million.

Despite the financial backing from real-estate groups, Mendenhall said the measure is for the benefit of homeowners: "This is something we're doing to make sure home ownership remains affordable in Missouri."

And the best part, she said, is that the measure won't have any effect on the state's budget because no tax currently exists.

The group Missourians for Tax Justice (MTJ) came out against Amendment 3 late this week; previously, no groups were known to have opposed the amendment.

One of the group's executive board members, state Rep. Jeanette Mott Oxford, D-St. Louis, said that she sees the measure as unnecessary because it's likely that no one in the state, including the Legislature, has any desire to create a transfer tax.

"So why bother to amend the constitution in this regard?" Oxford said.

Even if a transfer tax were to gain momentum, she said, the Missouri Constitution's Hancock Amendment would require state voters to approve the tax if the projected annual revenues were to exceed a pre-defined cap that adjusts annually for rises in personal income. Oxford estimated this year's revenue cap at "around $75 million," while Amendment 3's supporters put that amount at about $90 million. The Tax Justice group notes on its website that the state hasn't approved any type of tax in a decade and that Missouri voters haven't approved a ballot measure to increase taxes since 1987.

Amendment 3's supporters, however, counter that the Hancock Amendment applies to state taxes, but not necessarily to local ones. "There is no settled case law on the question of whether the Hancock Amendment would limit the ability of local governments to boost a transfer tax rate without seeking a vote of the people," the supporters say on their site.

Oxford also criticized the measure for having broader language than do most other state's transfer taxes. She's concerned about the possibility of legal action if someone were to propose funding increases for certain state housing programs, including the Missouri Housing Trust Fund. "I think there could be different court challenges about different types of funds, about whether they meet the definition of the tax or not," she said.

And there's also the possibility, she said, that the approval of a future ballot measure, such as the replacement of the state income tax with a statewide sales tax, "could completely invalidate whatever we do in Amendment 3."

For supporters, the biggest obstacle to the amendment's passage may be the ballot language. "It's a confusing issue because this is an instance where you have to vote 'yes' to stop additional taxes on homes and properties," Mendenhall said.

Puneet Kollipara, a former intern at the Beacon, is a senior at Washington University.