A state lawmaker is revisiting a push to scale back Delaware’s realty transfer tax, albeit using a more limited approach.
Delaware’s four percent realty transfer has been scrutinized by lawmakers and Delaware’s Board of Realtor
for the past half-decade. It is significantly higher than neighboring states after lawmakers raised it from three percent in 2017 to bridge a revenue shortfall. Last year, a bipartisan bill to put it back to three percent died in committee; it would have cost the state more than $100 million in revenue annually.
This year, GOP state Rep. Bryan Shupe is floating a more targeted proposal to scale back the tax. His bill would exempt anyone who sells their primary home in Delaware and buys another primary home within 12 months from paying the transfer tax on the second transaction – in other words, when the person buys their new home.
Shupe says the intent is to benefit a relatively narrow group of homebuyers: growing families seeking a larger house and seniors downsizing.
He believes his proposal would largely not apply to the growing number of retirees moving to Delaware to take advantage of other tax breaks.
"The ones that don’t really need help are the ones who are moving here from out-of-state and are receiving the benefits of lower cost of living and no sales tax," he said.
Shupe adds that while he sympathizes with those who suggest broader cuts to the realty transfer tax, he doesn't believe those proposals would be sustainable.
"I don't think it will be economically viable in the long-term," he said. "It's easy to do, but it doesn't achieve the goal we want to achieve."
The ongoing debate surrounding tax incentives available to affluent retirees colors other proposed tax adjustments this year. Delaware Finance Director Rick Geisenberger warned lawmakers not to "incentivize relocation to Delaware" purely to take advantage of additional tax breaks during a House Education Committee hearing on a pair of proposed tax credits last month.
Shupe’s bill is still collecting sponsors, and it has yet to go to the Office of Management and Budget for a fiscal impact review.