Saturday, May 12, 2007

Another insidious tax on developers

An utterly insidious practice now spreading across California is the “private transfer fee.” It is a new invention of developers who want to build housing tracts, but are faced with hysterical opposition by the usual suspects. In order to buy off the opposition, the developer agrees to sell the homes with a condition that every time the property is sold, a percentage of the sale price will be paid to the pet causes of the opponents. (Funny how a little cash can melt away the most fervent and heartfelt objections of Leftist activists). The first funds have been used to line the pockets of environmental and homeless advocates, but anyone can play. These “private transfer fees” have already gone as high as 1.75 percent of the sales price – or $8,700 for a $500,000 home – each and every time that home is sold. Ka-ching.

Bear in mind, there is no legal authority for this larceny. It is an invention concocted from thin air that turns the entire concept of contracts upside down, by binding innocent third parties – in this case, future homebuyers -- to conditions of an agreement to which they were never a party.

Sen. Lou Correa introduced SB 670 to forbid this private property tax – a reform that ought to command overwhelming support among Californians. Correa, although a Democrat, is not a Commiecrat, and has been a defender of property rights.

Against his better judgment, the bill’s sponsors (the California Association of Realtors) agreed to amendments that would authorize and legalize this outrageous practice – making any court challenges moot. Their rationale was that by legitimizing the tax, they could place limits on how much and for how long this theft could go on. If you can’t beat ‘em, join ‘em.

This immediately provoked a bidding war among the interest groups represented by the Senate’s other Democrats. After all, the amendments created a legalized cash machine with an adjustable knob, and they wanted more. The bill’s sponsors got whacked, and do did future homeowners.

The “private transfer fee” shouldn’t be regulated, adjusted, managed, monitored, or refined. It should be OUTLAWED – as Correa originally proposed. And if the legislature won’t do it, the issue should be fought all the way to the Supreme Court or taken to voters through the initiative.

A generation ago, it was the Realtors who led the property tax revolt that culminated with Prop. 13 and the Gann Spending Limit. How sad to watch them today.

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