Editorial: Emeryville voters should not let city take their home equity
Vote no on Measure O, which would make the city transfer tax for some sales the highest in California.
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When you sell your home in Emeryville, the city skims off 1.2% of the sales price. They call it a transfer tax. So, for example, the owner of a $500,000 property pays the city $6,000 right off the top from the proceeds.
It’s legalized equity theft. It’s one thing for cities to levy annual taxes for services they provide businesses and residents. It’s quite another when they take a large chunk of property owners’ equity when they move, when they’re no longer going to be using the city services that transfer taxes fund.
Of 482 cities in California, only 10 charge transfer tax rates that match or exceed Emeryville’s. And now, with Measure O on the Nov. 8 ballot, Emeryville officials want voter approval to take even a bigger cut of the property sale price.
For some sales, Emeryville’s transfer tax would be the highest in California. City residents shouldn’t let that happen. They should reject Measure O.
Under state law, property owners in California cities pay a small county transfer tax of 0.11% of the sales price. The counties usually split the proceeds with the cities.
But cities that operate under their own charters, as opposed to the general laws set by the state, can add their own transfer taxes with majority approval of voters. The 26 charter cities that have done so have much higher total transfer tax rates — as much as 15 times higher than the standard county rate. Emeryville is already one of the worst.
The current 1.2% rate in Emeryville applies to all properties, no matter the sales price. Measure O would increase the tax to 1.5% for properties that sell for $1 million to $2 million, and to 2.5% for properties that sell for more than $2 million.
In the entire state, according to March data from CaliforniaCityFinance.com, only Albany, Berkeley and Oakland charge as much on a $1 million sale. And Emeryville’s proposed rate for properties between $2 million and $3 million would be the highest in the state. At $3 million, Culver City would have the top rate.
The taxes are typically split between property buyers and sellers. For buyers, that means more money that they must borrow to finance their homes. For sellers, the transfer taxes are subtracted from the hard-earned equity left after their mortgages are paid off. That’s less money for the down-payment on the next home or for retirement savings.
City Council members claim the record 2.5% rate in Measure O for sales at more than $2 million is aimed at making larger commercial properties pay a more equitable share toward city services. That’s bogus. You don’t buy large commercial properties for as little as $2 million.
Instead, as property values increase over time, the higher transfer tax rates will capture more middle-class homeowners. That’s because the $1 million and $2 million breakpoints in the tax rates are not indexed to account for inflation.
Moreover, the tax rates are not marginal. That means, for example, a home that sells at $999,999 will be taxed at the 1.2% rate, or just under $12,000. But a home that sells for $1 million will be taxed at the 1.5% rate for the entire value, not just the amount above $1 million. So, in this example, that $1 increase in the sales price would increase the transfer tax to $15,000.
Ostensibly, the purpose of Measure O is to raise more money for the city’s general fund. There are fairer ways to accomplish that and still have a progressive tax structure. For example, the city could seek a parcel tax for existing property owners based on square footage.
But charging property owners as they are leaving town is just wrong. The current Emeryville transfer tax is legalized equity theft. Measure O would only make it worse. Vote no.