Real Estate Excise Tax

My brother Adam asked me today about the move in the Washington State Legislature to increase the Real Esate Excise tax, something with which I'm particularly familiar, having just paid it on the recent sale of my house. Here's my reply to him.

When you sell a house, this is a tax levied by the county or the city or the school board or some combination of them levies on the seller of the house. How much depends on where you are - it's a state law that gives local governments the right to do this, but doesn't mandate it or the amount. The various government bodies that can hit you with the tax each have limits on how much tax they can apply, like .004% for this one, and .0025% for that one. Looking at my closing docs, it appears that in Redmond Ridge, it's currently 1.78%, which was about $9,113 in tax I just pay out as the seller.

Except for the real estate commissions, which are usually 6% for houses under $1 million, it's the biggest chunk of money that reduces that what you get for the sale of the house. It's also useless to the seller, because the seller is typically moving out of the area where the money will be used. That's an easy win to get passed through the legislature because the people that have to pay it are not the ones that benefit.

Interestingly enough, there's a clause in the law that says that if the government hasn't used the money within six years, you then have a year's time (so between year six and seven of paying it) to ask for it back and if you do, you get it back with interest. I've never heard of anyone asking for it back and can't imagine anyone actually getting the money even if they did.

The bill as it stands now (which may not be it's final form) is here:
http://www.leg.wa.gov/pub/billinfo/2005-06/Htm/Bills/House%20Bills/2196-S.htm

If it passes, I guess it doesn't mean that anyone's taxes will raise immediately, it just means that local government is authorized to raise them. Of course, such authorization is practically the same thing anyway.