Allentown Looking to Increase Transfer Tax
Get Ready To Pay More When You Buy or sell a Home In Allentown, if the City Council Gets its way...
This Fall, a 1996 tax cap will be up for debate in Allentown. On Wednesday, the City Council voted in favor of approving a ballot issue that may lead to the first hike in the deed-transfer tax in many years. The city's home rule charter prohibits rate increases for a number of revenue sources, including the deed-transfer tax.
It is forbidden for members to raise taxes on deed transfers, earned income, company rights, amusement devices, and other sources over the rates established in 1996. This month, Allentown Finance Director Bina Patel pleaded with council members to approve the ballot question and put it on the ballot for autumn voting.
A 2% deed-transfer tax is levied on all real estate sales in Allentown PA, including homes, buildings, and land. Of this amount, 1% goes to the state, and the remaining 1% is divided between the city and school district, according to Patel. If it were raised to 3%, purchasers of a $250,000 home would have to pay an extra $2,500 in deed-transfer taxes.
Budget season is going to be difficult. Following their disagreement with Mayor Matt Tuerk late in the previous year and rejection of his requests for tax hikes to pay for additional roles and services, city officials appear to be getting ready for another challenging budget season. Their relationship has probably been further strained by council's decision to employ a counsel to investigate filing a lawsuit against Tuerk at the meeting on Wednesday.
Two budgets that featured no new taxes for 2024 were approved by the council late last year; Tuerk vetoed the first, but allowed the second to become the city's yearly spending plan without his signature. According to Patel's statement this month, Allentown currently has a $6 million “gap” between its earnings and expenses. The city would have "greater chance to collect income" if the 1996 cap on deed-transfer taxes were lifted.
The main sources of funding for the city are property taxes and earned-income taxes, which the council can raise with a simple majority vote during the yearly budgeting process. "One more asset, one more item that we can tap into" is the deed-transfer tax, Patel informed council members during a committee meeting on July 17. Santo Napoli, a councilman, pleaded with his peers to back the ballot question.
He suggested that the council set aside any additional funds from the increase for community programs to aid first-time and current homeowners.
According to Napoli, recent data on property sales suggests that Allentown could earn almost $2 million annually by raising the deed-transfer tax by just half a percentage point. In order to pay for those initiatives and "really get some of this stuff done," the city would have "a consistent stream of revenue," according to Napoli.
Furthermore, the vice president of the council stated that companies, not individuals, would bear the majority of any new deed-transfer taxes.
According to Napoli, corporations and LLCs purchased 46% of all properties sold in Allentown last month. He declared, "Homeowners are being forced out of this market."
Realtors promise to oppose the referendum. Asher Schiavone, who began serving as the Greater Lehigh Valley Realtors' director of government affairs last month, stated that his organization's members are "100% opposed" to eliminating Allentown's deed-transfer tax cap. He stated on July 17 that the Lehigh Valley real estate market is "very challenging" and that even a slight rise in deed-transfer taxes might result in price increases of thousands of dollars.
"How is housing becoming cheaper if the cost of home ownership rises, particularly for those with low to moderate incomes?" Schiavone stated.
Furthermore, he indicated that rent increases in Allentown might result from any future increases in deed-transfer taxes. He declared, "We are willing to wager that [LLCs] will charge the renters for such expenses." "We do not believe developers could bear that expense." Schiavone asked the council to make sure the referendum's wording is not "misleading" and makes it abundantly evident that passing it will allow deed-transfer taxes to rise.
The Lehigh County Board of Elections will examine the proposed referendum before deciding whether to put it on the ballot in November.
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