I have read a lot of erroneous comments on my blog and today I am re-running an earlier blog explaining the FairTax and rental housing. I am sure I will have many more erroneous comments as a result of this, but I think the neophytes of the FairTax need to know the truth.
One comment disregards the 23% sales tax and calls it a 40% sales tax and has even pushed it up to 100% tax at times. Now this is an hysterical disregard for the truth as the FairTax is written.
If you don't accept the truth, nothing adds up and it becomes a frustrating attempt to distort the truth. If you don't like the FairTax, fine, but don't distort the facts.
As you know, both owner-occupied and renter-occupied housing is taxable under the FairTax. With owner-occupied housing (new), the tax is collected up front at time of sale. With renter-occupied housing (new or used) the monthly rent is taxed as it is collected by the landlord.
Renter-occupied housing under the present Income tax is paid with after-tax dollars. Renter-occupied housing under the FairTax is paid with pre-tax dollars, plus there will be a pre-bate added to the renters income to stretch his/her dollar further.
Since investment property is not taxed under the FairTax, but the rents are taxed, the rental property will not be subject to double taxation.
An example in the FairTax Research information compared the Income Tax structure with the FairTax structure using $500 in monthly rents. With a 15% income tax bracket, the renter would have to earn $647 in order to pay his income taxes and payroll taxes and have $500 left to pay his rent.
Under the FairTax structure, the $500 rent plus the 23% sales tax amounts to $649, $2 more than the income tax in order to cover his rent. HOWEVER, in comes the pre-bate to the rescue! And that renter has only had to use $2 of his monthly pre-bate to pay his rent, leaving the remainder to pay the taxes on his medical bills, dental bills, groceries, etc.
I hope that answers any questions you might have. If not, go to FairTax.org for more information. Read the FairTax bill (HR25 or S1025) yourself. If you don't like what you read, then continue to mire yourself in the 60,000+ pages of the present income tax system and continue to watch our country rot economically.