To the Editor:
Your editorial (June 27) too easily embraces the proposed property transfer fee as “relatively small on high-end real estate,” suggesting it would be a community benefit without detriment. I think it’s more complicated than that, especially for senior “house millionaires” (of whom there are many here) considering downsizing.
Let’s consider what it would mean in real-life terms to the many of us who are “house” millionaires, in that our houses are worth a million dollars — or substantially more.
A couple of years ago the commonwealth adopted an ill-considered 4 percent tax on “incomes” that are greater than $1 million, even when that “income” is largely from the sale of a primary residence. From what I learned in law school, the sale of a residence is not ordinary income. If there is capital appreciation, it is treated analogously to a capital gain, subject to its own rate of taxation, and too complicated to get into here. It’s usually a onetime event. In any case, it’s not an annual event, i.e. the million-dollar “income” is not repeated year to year.
Were the transfer fee to be adopted, it would impose an additional tax on the same kind of “income” I call out, above and beyond the 4 percent already levied by the commonwealth.
There are more complications, of course, but let me (over) simplify, and put real numbers to a hypothetical sale at the now median price of a Vineyard home, $1.6 million. From such a sale, the $600,000 in excess of $1,000,000 would trigger an additional $24,000 in taxes. If the transfer fee were implemented, there would be an additional $12,000 in taxes due. That $36,000 isn’t chickenfeed.
It has not been reported clearly who, the seller or buyer, would pay the transfer fee. It makes a difference in considering its adoption. At the point of sale, the seller ceases to participate in the capital appreciation of the property, while the buyer embarks on that escalation, even if it is not immediate. Accordingly, it seems fairer to me if the buyer is subject to the fee. While the seller can shelter some of the proceeds from the sale (one of those complications) from the customary taxes on the sale of a primary residence, those amounts, $250,000 for an individual seller and $500,000 for a couple, have not increased in many years, while home values have.
Thus, while the transfer fee may prove a benefit in some respects, it could very well be a detriment, particularly to seniors. In any case, it needs much more consideration by our legislators.
Nicholas W. Puner
West Tisbury
