In an effort to raise $50 million in revenue from Michigan homebuyers, the Michigan State Housing Development Authority is considering an increase in the state’s commercial and residential real-estate transfer tax.

The proposed MSHDA increase will raise the current .75% rate to .85% but is triggering widespread opposition from the real estate industry, Republican lawmakers, and free market think tanks.

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The MSHDA plan has not been translated into legislation yet, but the potential revenue it is expected to generate is already being claimed by Gov. Gretchen Whitmer’s thus far unfunded affordable housing construction and rehab initiatives.

“State revenue spiked after the pandemic so there’s no need for an additional tax hike for preferred spending,” the Mackinac Center’s Director of Fiscal Policy James Hohman told The Midwesterner. “If extra housing subsidies are a priority, lawmakers can afford them without raising taxes on real estate transfers.”

An editorial in The Detroit News ridiculed the plan: “Michigan’s real estate industry is trying to head off a plan floated by a state authority to raise taxes on home sales in the name of making housing more affordable,” the March 2 oped begins.

“If the idea sounds contradictory, that’s because it is,” the oped continues.

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“But it fits into the Whitmer administration’s agenda to raise a variety of taxes to generate revenue for new spending programs, instead of reprioritizing existing resources.”

 

The editorial prompted Sen. Jim Runestad, R-White Lake, to comment on X: “As I predicted, the democrats plan to raise your taxes on the things you have to have! The Democrats have been gorging exquisitely on federal funds like there’s no tomorrow. Special interest porkbarrel projects that would make porky pig jealous, big no-bid contracts on everything under the sun. I haven’t seen as much lard, as I saw in last year‘s $9 billion wastrel, since I walked behind a liposuction clinic and looked in the garbage bin. The Democrats blew all $9 billion federal surplus utilizing photo ops holding gigantic posterboard checks praising their local bacon-their local pork barrel Projects. They now want to hit you in the pocketbook with across-the-board tax and rate increases for new spending. As I predicted, after the Democrats blew through the entire $9 billion-plus- surplus last year on boat docks and Pickleball courts and swimming pools and piles and piles of crap no one needed, they would then pivot and start raising your taxes on host of vital services people have to have. Sure enough the Governor’s appointed Public Service Commission just announced another gigantic increase of 92 million to hit energy ratepayers like a 2 x 4 to the forehead. They also plan to slap a new tax on you whenever you sell your home to fund subsidized housing in communities all over the state. Next they’re slapping on huge water rate increases on the backs of those who pay their water bills, to give freewater to those who do not pay their bills. And lastly, they’re increasing your income taxes from 4.5% back up to 4.25%. The Democrats policy positions never seem to change, take from those who work and produce, and and spend on buying votes with providing unlimited public dollars.”

Realty industry groups also are not happy with the tax-increase plan.

“Every increase in taxes means there are buyers who won’t qualify for a mortgage on the home they want,” Brad Ward, vice president of public policy and legal affairs for Michigan REALTORS, told The Detroit News. “It will have a chilling effect on an already challenging market.”

In a text sent to The Midwesterner, Rep. Joe Aragona, R-Clinton Township, vice chair of the Housing Subcommittee, warned that the transfer increase could disincentivize families and businesses considering relocation to Michigan, which has been struggling for decades to maintain a steady population.

“High costs are a huge barrier to housing for Michigan families,” Aragona said. “The Whitmer administration is floating a tax increase on property sales that will only create a steeper barrier to home ownership in our state. This tax will also make it more expensive for small businesses buying storefronts and farmers buying fields – setting our entire economy further backwards.”