Re-Fi Trial Balloon Taking Flak

Last week, Governor John Lynch sent up a trial balloon about applying the state's Real Estate Transfer Tax to any homeowner who refinancing a mortgage. In today's Union Leader, Kurt Strandson tries to shoot it down:

Gov. Lynch's proposal for a 1 percent to 1.5 percent tax on refinanced mortgages, including home equity lines, is the most counterintuitive idea possible to these efforts. It demonstrates how out of touch he is with the people of New Hampshire and their current situation. In addition, it is a poor economic policy.

When people are able to lower their monthly mortgage payment, the money they save goes right back into the state's economy when they spend it on bills and necessities. If the governor has his way, a couple refinancing a $200,000 mortgage will have to pay a $2,000 refinancing tax at closing, in addition to the current rising costs to refinance. Homeowners may not be able to complete the transaction because they don't have the cash to pay that tax. That could potentially cause foreclosure.

Lynch looking to tax home improvements

Tom Fahey reports in his Under the State House Dome column in the Union Leader that Governor John Lynch is looking to expand the Real Estate Transfer Tax to cover not only when you sell your house, but also when you refinance:

The basic idea is to pull refis into the existing tax, and to lower the current 1.5 percent tax rate. Eleven other states already have a similar tax in place. It's not clear if the proposal will be ready by the time the Senate meets to vote on a budget plan on Wednesday.

Another idea in the wings is to look closely at limited liability corporations, which can be structured to escape business taxes on big payouts to owners.

The Senate Finance Committee directed the Department of Revenue Administration to comb through tax laws to find every little hole a potential taxpayer could slip through and find a patch. Lynch spokesman Colin Manning said the refi tax idea is one result of the DRA's work. (Emphasis added)

The change would hot homeowners who look to refinance in order to get a better rate, but also those who add a second mortgage to pay for college or starting a business, or anyone who takes out a home equity loan to fix up the homestead.

It looks like any money you keep in your pocket is now being treated by the Governor and Senate Finance Committee as a little hole that you've slipped through.

Imagine is they put this much effort into cutting spending in a recession as they did to looking for ways to get more money out of taxpayers.