Steve Muehler (If I was Governor of California) - Plan 4: California Transfer Tax
Steve Muehler - Plan 4 for California: California Real Estate Transfer Tax for all Sales of Residential Properties exceeding $750,000 USD, and all Commercial Properties exceeding $1 Million USD.
In a continued effort to ensure that “the wealthy are paying their fair share in California”, we should implement a “California Real Estate Transfer Tax”. This Transfer Tax is collected at the time a property is sold or transferred. The California Real Estate Transfer Tax will be equal to 5% of the sales price or the existing value of the subject property as determined by a state licensed real estate professional, whichever is less. Transfers of properties through probate will not be subject to this tax.
Those chuckling at this proposal should note that the same Real Estate Property Tax in Florida is 6.25% to 8.5%, and you can all see how that is working out for the State of Florida, I believe the have had a robust real estate market for some time now.
Approximately 450,000 residential real estate properties change hands each year in the Great State of California. The average sales price is approximately $710,000 USD, and factoring in my Plan One in this Blog Series, lets assume the median sales prices inches closer to $750,000 USD. Just using this $750,000 USD number, that means 225,000 homes paying a 5% Real Estate Transfer Tax will equal approximately $8.5 Billion USD. This number will be much higher when factoring in the Mansions, Mega Mansions, etc. So, conservatively speaking and keeping the numbers easy, let’s call it $10.32 Billion USD.
In California, last year there were a total of 403,918 Commercial Real Estate property sales. Of which, 68,775 were sold for more than $1M USD, and 11,858 were sold for over $10M USD.
Going from data in my Blog Post 3, if the average commercial mortgage loan is $5M USD, and most commercial mortgages are generally for a maximum of 70% of the value, lets assume that the average sales price of the properties greater than $1M USD and less than $10M USD was $4M USD.
This tax equates to approximately $200,000 per property, or an annualized state revenue of $13.75 Billion USD. And if we estimated the 11,858 that sold for more than $10M USD, that would equate to an annualized tax revenue of $5.93 Billion USD.
STATE REVENUES: This $30 Billion USD in new State Revenues is probably a pretty accurate number, given I am using current low-side estimates, you have to figure in a real estate sales slowdown with the implementation of this tax. This will make my figures more realistic, but also slow down the rate of appreciation on properties in the State of California. My overall plan is to have “real estate appreciation be equal to that of median income growth” in the State, keeping home price more affordable to the masses.
The Score so far on State Budget:
Plan One: Eliminate California State Income Tax
Resulted in $100 Billion Deficit
Plan Two: Decriminalize Prostitution in California
Resulted in $15 Billion in State Revenues
Still have a $85 Billion Deficit, but we have no State Income Taxes and we have Decriminalized Prostitution in California.
Plan Three: California Mortgage Tax
Resulted in $6.75 Billion in State Revenues
Still have a $78.25 Budget Deficit.
Plan Four: California Real Estate Transfer Tax
Resulted in $30 Billion in State Revenues
Still have a $48 Billion Budget Deficit.
So, Plan Four, California Real Estate Transfer Tax.
Additional Online Resources:
About Mr. Steve Muehler:
Personal Site: http://www.SteveMuehler.com
Personal Site: www.StevenMuehler.com
Investment Banking: www.PPMSecurities.com
Debt Markets: www.PPMDebt.com
Equity Markets: www.PPMEquity.com
Commercial Insurance: www.PPMCommercialInsurance.com
Bail Bonds / Immigration Bonds: www.MuleHairBail.com
EquityLock Commercial: www.EquityLockCommercial.com
EquityLock Residential: www.EquityLockResidential.com