RICHMOND, SEPT. 23 -- An economist warned officials today of pitfalls in imposing taxes on housing and development to pay for local transportation needs and said that Virginia's first-time homebuyers would be hardest hit.
"If we have impact taxes the price of homes will be increased," said Robert Cook, who appeared on behalf of the Home Builders Association of Virginia and the Virginia Association of Realtors. "If we have recordation taxes, the price of homes will be increased."
Cook, chairman of the University of Richmond economics department, told members of the governor's Commission on Transportation in the 21st Century that the taxes would result in a no-growth situation that would be detrimental to Virginia's economy.
The recordation or transfer tax, which is essentially a sales tax paid at the closing of a house purchase, and the impact tax, which would be levied on builders of new houses and commercial developments, are among nine proposals a subcommittee of the transportation commission is studying.
Some of the other options to finance local transportation needs put forth by the commission staff include regional taxes, transportation utility fees based on a landowner's impact on the road system, parking fees, special assessment districts and road corporations organized for the purpose of promoting and developing transportation facilities.
Several hundred real estate brokers and builders from around Virginia packed the hearing at the State Capitol.
The groups charge that the taxes discriminate against one group of Virginians, those who buy or sell homes or commercial properties. They suggest that low- and moderate-income taxpayers who are trying to buy a house for the first time are especially hard hit by an additional tax in addition to the purchase price.
Cook acknowledged there are other factors affecting a localities' real estate tax rate. He told Sen. Charles Waddell (D-Loudoun) he also had not analyzed what impact highway gridlock has on the selling prices of houses and new developments.
Waddell lives in an area of Northern Virginia that is experiencing rapid growth as a bedroom community for Washington-area commuters.
Cook pointed to the experience of Prince George's County, which imposed an "itty bitty" transfer tax of two-tenths of 1 percent in the early 1960s, only to increase it to the current rate of 1.5 percent.
The result, factoring in the rising costs of new houses, means people buying entry-level housing at $75,000 are paying $1,125 in taxes this year, while they paid only $80 in 1960 on a $40,000 entry-level house, he said.