What is the main purpose of a transfer tax?

The main purpose of a transfer tax is to ensure tax collection upon property transfer. When real estate is bought or sold, a transfer tax is imposed by the government, which allows them to collect revenue at the point of transaction. This tax is typically based on the sale price of the property and is crucial for local and state funding, as these funds may support various public services such as education, infrastructure, and community development.

Transfer taxes provide an essential financial mechanism for governments to receive taxes when real estate ownership changes hands, thereby reinforcing the principle that property transactions contribute to public funding. This is distinct from the incentives or regulations related to property sales, leasing agreements, or land-use planning, which serve different functions within the broader context of real estate and urban development.