FREQUENTLY ASKED QUESTIONS
1. What is the Real Estate Excise Tax (REET)?
In Washington, the real estate excise tax is collected by state and local government. An excise tax is imposed on every sale of real estate in this state at the rate of 1.28 percent of the selling price. Unless otherwise specifically exempt from tax, all sales of real property are subject to the real estate excise tax. That is, for every $100,000 of a property's sales price, the state assesses $1,280 in state real estate excise tax. Washington's real estate excise tax rate is the second highest in the nation.
In addition to the high rate the state imposes, Washington is one of only 12 states that also allow local jurisdictions to tax real estate transfers. Several options have been given to cities and counties that allow for additional taxes related to capital projects and growth management. With these options, the total local REET allowed has grown to 2.5 percent, bringing the maximum combined state and local real estate excise tax rate in Washington to 3.78 percent. Most jurisdictions impose a combined rate of either 1.53 percent or 1.78 percent, with the majority of transactions subject to a 1.78 percent rate.
2. Why would the state legislature consider raising this real estate tax even more?
The state budget faces a $3.2 billion budget shortfall because of four years of overspending. If the spending is not curbed it leaves only one option&more taxes. There have already been proposals to raise Washingtons real estate excise tax to fund programs that will be introduced in the next legislative session because the state coffers are empty. Too often, when state government has been short on cash, they try and raise taxes. Rather than curbing spending they demand a greater contribution from a family's budget. A home tax could be used to clean up the state's "busted budget."
3. Why is the Real Estate Excise Tax the wrong solution?
Washington's real estate excise tax is already the second highest in the nation. Further, real estate taxes are just another tax on property that penalizes people for buying and selling their home. Real estate taxes double-tax property owners who have paid property taxes each year and then must pay thousands of dollars more when selling their home. It would be another blow to a fragile housing market right now.
Just a .65% increased tax on homes, as has been previously proposed, would be a 130% increase over the current local real estate tax, and would cost the average homeowner in the state over $1657 when they sell their home. Real estate taxes are just another form of property tax on homes, but it does not target everyone equally. The Real Estate Excise Tax is an inequitable tax on home equity because it is levied against the gross sales amount, not the profit or gain on the sale of property. It penalizes people with low amounts of equity in their home and the real tax rate often exceeds the general sales tax rate. This "pick pocket" tax robs the home equity from unsuspecting homeowners when they sell their homes.
4. What can I do to help defeat an increase in the Real Estate Excise Tax?
You can help stop a home tax by:
1) Contacting your legislators directly or through the legislative hotline at (800) 562-6000 and urging them to "VOTE NO to any tax on homes."
2) Sign up for e-updates at www.stopthehometax.com/eupdates/.
3) Urge your friends and neighbors to join us by signing up for e-updates at www.stopthehometax.com/tellafriend/.
Through our e-updates, we'll keep you posted on the status any legislation and additional activities to help ensure a defeat of a home tax increase.