Tim White’s column last Sunday (“If they build it, they won’t pay“) got it wrong. In the 1980s, the General Assembly repealed the inventory tax for manufacturers, wholesalers and retailers because it was unfair to tax a product before it was sold. Houses constructed and offered for sale are a builder’s inventory and should be treated in a consistent fashion.
House Bill 168 (Exempt Builders’ Inventory) only exempts the tax imposed on improvements to the property, not the tax levied on the land itself. Thus, local governments will continue to collect sufficient tax revenue to cover any police and fire protection services that might be required. A house under construction or a new unoccupied house is not creating any burden whatsoever on the schools or other public-sector services.
In addition, builders will continue to pay sales tax on the lumber, roofing materials, appliances and the multitude of other items that go into a house, of which the local governments get their fair share.
Builders, not local governments, pay for all of the infrastructure that goes into a new development. They construct and pave the streets, install the water and sewer lines and connections, and any other infrastructure required by the local government. Road and other infrastructure maintenance does not become a public responsibility until it is accepted by the local government. Typically, this occurs only after a substantial number of lots in a new development have been sold and the homes are occupied. At this time, these homes are being occupied by taxpayers who are paying taxes on the full assessed value of their property. There is nothing in H168 which will change this result.
In fact, the Economics Department of the National Association of Home Builders finds that the enactment of this bill will stimulate the construction of over 500 additional houses statewide. The construction of these additional homes will produce almost $31 million in new state and local taxes and 2,125 more jobs.
The boost to the economy doesn’t end there. Once there is a sufficient number of residential rooftops, commercial development follows to serve the residents of these new neighborhoods. Additional jobs and tax revenue are created, and this cycle repeats in every part of our state.
One of the major reasons that our economy has suffered is because of the tremendous hit that the housing industry took during the Great Recession. Even now, statewide housing starts are only back to one-half of their 2007, pre-Great Recession level.
Legislators understand that housing is the engine that drives our economy and is a major job creator. That explains the overwhelming bipartisan support which H168 has garnered thus far (110-7 in the House and two committees in the Senate).
In the short run, the enactment of H168 will create new jobs and stimulate the production of new homes. In the long run, local governments will benefit from an expanded tax base. And, builders will continue to pay their fair share.
Natalie W. Fryer is executive officer of the Home Builders Association of Fayetteville.