Posted: 12 May 2008 12:35 pm
Post Subject: FairTax good for real estate, not bad! Read Article
I think all the idea's I have been reading here on the FairTax are good constructive discussion and welcomed whether pro or anti FairTax. I am for the FairTax and speak on it every chance I can get. Regarding the discussion here on real estate home prices under the FairTax, I feel it was narrowly focused so I would like to suggest the following:
Homebuyers purchase homes based on numerous economic and non-economic considerations that have little, if anything, to do with the tax-affected basis or treatment of new vs. existing housing under the current tax code or under the FairTax. Residential realtors would be the most hurt if the discussion here on home cost under the FairTax would the only factors to considered. Yet, the realtors I speak to LOVE the FairTax. Why? The FairTax accelerates the volume of home sales. Today, buyers seeking to buy a new home or to step up to a larger or second home are taxed on their savings, reducing them. No wonder our savings rates are so low! Realtors make more money faster since there are more qualified buyers out there! Note: 75 % of the home sales in this country are pre-existing homes, so no tax under the FairTax. The FairTax plan has many positive features you are missing, not the least of which are the advantages that accrue to real estate ownership. The FairTax plan allows homeowners to: · Pay an entire house payment, principal and interest, with “pre-tax” dollars, a major improvement over the paltry home-interest tax deduction, which only pays interest with pre-income tax/post-payroll tax dollars. • Get this benefit without itemizing deductions, which only a small percentage (30%) of homeowners do today. • Save for down payments much faster, without the penalty of taxation. The current tax system takes three bites out of the savings apple. First, it taxes wages and salary income from which savings are generated. Second, it taxes the income earned from savings as that income is generated. Third, if the investment (a stock, bond, real property interest) is sold for more than it cost, the capital gain is taxed again. Under the FairTax, a family can save for a down payment without fighting against cascading taxes on savings. Homebuyers can qualify more quickly to move up to a new home or purchase their first home.
What about interest rates? Under the FairTax there will be a reduction in interest rates even lower than they are today. (The FairTax results in the immediate elimination of the interest differential between tax-free and taxable debt). Unlike the current tax regime, the FairTax does not tax interest, imposes a lower marginal tax rate on new home purchases, fully un-taxes capital gains from the sales of used or new property, and terminates cost-raising tax and compliance expenses imposed on upstream labor and materials. There are as many as 7 levels of upstream costs that get reduced under the FairTax, not just one level. Each supplier has to get the raw materials, pay employees etc. So when looking the price of a new home under the FairTax, I urge you to not keep a narrow focus on just price. Look at everything I have mentioned above, I think you will agree we will all be better off! Rich/Orlando Fl
Posted: 12 May 2008 03:22 pm
Post Subject: TAX MYOPIA - Re: FairTax good for real estate
Well, Rich, you've taken a small slice of the economy and found a silver lining for your national sales tax. All the advantages you enumerate about more money for down payments, more savings, more of everything will be more than counter-balanced by the more we'll be paying for everything else in our lives, from cars to refrigerators to power, to gasoline, clothing, etc.
The blunt fact of the matter is that for the majority of the public, this represents a big tax increase if you look at the tables I presented in my past post. Remember four fifths of American taxpayers make less than 68-thousand dollars and pay an effective income AND social insurance tax rate of between 1.8% and 15.7% depending on income.
In addition, what products or services will be exempt from taxation? Food? Medicine? Medical services? What other services? Everything you exempt will mean the sales tax rate goes higher on what is left. Remember, you have to produce roughly 3 trillion dollars just to break even on the federal budget. If those items are exempted, the rate for your tax soars past 30%. If you try to refund money to the poor, you'll need your dreaded IRS to keep track of incomes.
And all of this is to keep us from gathering our receipts once a year and going to H & R Block.
Posted: 22 May 2008 07:29 am
Post Subject: Re: FairTax good for real estate, not bad!
Karen,
No items are exempted under the current system. Can you identify a single producer of any food item that does not pay a corporate tax, payroll tax, or any other taxes that go to the government coffers? Those taxes are embeded in the price of the food item you are buying. Instead of the fairtax are you suggesting that we tinker with the current system to exempt producers of certain goods to not pay a corporate tax on profit they make, not pay payroll taxes, and exempt their employees from paying personal income tax? Removing those taxes would lower the price of those goods. The prebate UNtaxes everyone up to the poverty level. You only start paying taxes once you spend more than the poverty level. The prebate is based on the number of household occupants, not income as you misstated. No need for the government to keep track of anyones personal income. Here is another point regarding the problem with the current system.
Suppose 1 person has been working on a business for 4 years. That person gets paid nothing during years 1,2 and 3 and then makes $100,000 in year 4. Another person makes $25,000 every year for 4 years. They have both make $100,000 in 4 years. The current system taxes the person who made all of the money in 1 year at a higher tax rate than the person that made their money over 4 years. How does that make sense to anyone. Two people with the exact same income over a given time period and they are taxed at different rates based on the timing of the income?
FAQ
Search Forums
Log in
Register
Re: Go to your website...Re: Couple living on 18K
Re: Go to your website...Re: Couple living on 18K
Re: Go to your website...Re: Couple living on 18K
Re: FairTax good for real estate, not bad!
Re: FairTax: The Big Picture
Re: FairTax: The Big Picture
Re: Go to your website...Re: Couple living on 18K
Re: Hey y'all - Still 'UN' fair