The last few years has seen the Minnesota legislature trying to find a way to tax local real estate commissions earned by agents and brokers. The main reason is that they, the government, spend too much money and need to find other financial means to support their budget. They know raising property taxes is a sore spot with local Minneapolis and St Paul residents, so they look to an industry that has seen recent financial gain.

The problem is that with a real estate market now in the toilet, most agents do not make as much now as they did in 2004-2005. Politicians want to label real estate as a “service” industry, much like a hotel or car rental company. We just rented a rental car the other day while our car was getting new tires. It was so nice to see an additional 6.2% tax on the bill, in addition to the sales tax, which was labeled as a “Minnesota Car Tax”. Minnesota would like to do the same to my paycheck. Now don’t take this as a complaint, I do have a larger point for the consumer.

In 2005, the bill to tax real estate commissions didn’t pass. Probably most likely because they were unfairly singling out one profession. No big surprise, but they came back the next year with an even better bill. This time, real estate agents were not the only target, but now everyone that takes part of a real estate transaction were being included – title companies, local lenders, lawyers, etc. Obviously, you can tell this made alot of people mad.

Not to get to deep into this topic, but the measure didn’t pass again this year. The main problem with lumping real estate into a “service” is that this is no hotel room for $100 a night. This is one of the largest purchases people make in a lifetime and hundreds of thousands of dollars “exchange” hands. The problem is that by taxing the people who work the transaction, they will have to pass the cost on to the consumer by raising their fees. So the people who really lose are the sellers and buyers who are just trying to close on a home.

Many people in today’s market cannot afford to have their fees increased when it comes to buying or selling a home. The Minnesota government is just wanting to cash in on a good market that no longer exists. They think we make too much money, but last I checked they make alot more money than the average agent. Maybe we should tax their job and label it a “service” industry as they are here to serve the people, right? I wonder how they would handle such a proposal?

Bottom line, any time you see politicians wanting to apply more taxes to hard working people’s paychecks, stand up and say something. If it happens to us, it is only a matter of time before it happens to you.

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One Comment

  1. Craig Anderson October 16, 2007 at 12:57 pm - Reply

    Hi Jen,

    As a Lender, I am always amazed at how many fees and charges are part of a Real Estate closing. I agree that in the end it is the consumer that ends up footing the bill. There is definitly a need to simplify the settlement procedure as it is very confusing for the average person let alone for people that are in the industry.

    Craig Anderson

    P.S Great Blog!

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