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Since rental property is taxed at a higher rate (in many states) than owner-occupied homes, the FairTax is like a tax on to of a tax (the 'extra' property tax on a rental) on top of a tax (the base proerty tax rate also paid by the homeowner).
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yes OFFICIAL (ie legal) rental (commercial) property is taxed higher than RESEDENTAL property
residental (single owner, single occupency) property has its tax brackets
COMMERCIAL property (which includes many rentals) has its tax brackets
and INDUSTRAIL PROPERTY has its own tax brackets
my TINY 1400sf house on a TINY 50x100 lot...the property taxes are 12k a year...that's right 1000 a month just in taxes.....mean while I bought it in 1995 for 150k...its nearly paid off...but that tax (which goes up every year) will ALWAYS be there...whether I live there(owner occupied) or rent it out
the average 1 bed room appt here is 1400 a month....why TAXES..and the EXPENSE of MAINTAINING
And the going rate for RENTALS is greater than the going rate for PURCHASE. It's like paying a short-term premium
My gripe here is that the FAIRTAX on top of the RENT is much greater than the FAIRTAX on to of the mortgage payment. A homeowner's FairTax DECLINES as their mortgage is paid off, while the renter's FairTax keeps going up and up.
Person A's rent ($2,000) includes $460 FairTax (23% of $2000).
Peron B's mortgage payment must be disaggregated to determine the amount of FairTax in his mortgage payment. The property tax and principal portion of his mortgage payment will NOT be subject to FairTax.
The component of B's mortgage payment attributable to insurance WILL be taxed, as will a portion of the mortgage interest. Technically, the interest taxed is the portion above the "federal funds rate".
At EVERY point during the term of the mortgage, B pays less FairTax than renter A paying the same amount (in this case, $2000).
Even better for B is the fact that she LOCKED IN her P & I payment with a fixed rate mortgage, and worse for A is that he has not escaped rent inflation, so A will pay less FairTax over time (rising homeowner property taxes are not subject to FairTax, and the taxable mortgage interest declines as the mortgage is paid off.) and B will pay more and more FairTax over time.
Rough calculations of mine suggest that a person (C) who rents a home for 30 years (50 years) will probably pay about 3 times more FairTax (5 times more FairTax) than a homeowner (D) living in the same home for the same length of time.
Rent is NOT subject to the Fairtax. Mortgage payments are NOT subject to the Fairtax.
The FairTax has positive effects on residential real estate far beyond this narrow question. Today’s homeowners, if they itemize (and 70 percent do not), pay their interest with post-Social Security/pre-income tax dollars. They then pay their principal with post-SS/post-income tax dollars. Those who do not itemize get no advantages at all. Under the FairTax, all homeowners make their entire house payment with pre-tax dollars.
Quote:
Originally Posted by freemkt
What if I don't want to live in Gangbangerland? Beggars can't be choosers?
Not every poor neighborhood is flooded with gangs. Crime is probably higher than a swanky gated community, but the housing does exist. Now, if you choose not to live where you can buy a house then that is a choice you make.
The main problem with the "Fair tax" is that it brings the hammer down on the elderly. Assuming someone saved using a device other then a traditional IRA they are going to get crapped on by a consumption tax. This is because for the 40+ years they were saving they were saving with their after tax dollars under the income tax system. If one switches to a consumption tax as a person spends down their retirement savings in retirement they are going to get double taxed on the money which was taxed once pre-"fair tax" when they were earning it and again post "fair tax" when they are spending it down to live on in their retirement.
All in all that is one of the biggest problems. The other big problem is that, unless there is an accompanying estate/gift tax it will allow a huge amount of money to go untaxed period.
yes OFFICIAL (ie legal) rental property is taxed higher than RESEDITAL property
residental (single owner, single occupency) property has its tax brackets
COMMERCIAL property (which includes many rentals) has its tax brackets
and INDUSTRAIL PROPERTY has its own tax brackets
all I can say is DUH
That's not all of it. RESIDENTIAL (single-family) RENTALS in many states are taxed at higher rates than RESIDENTIAL owner-occupied single-family homes.
Why should MY home be taxed at a higher rate than the owner-occupied home next door? Is it my fault I don't own it?
And the going rate for RENTALS is greater than the going rate for PURCHASE. It's like paying a short-term premium
My gripe here is that the FAIRTAX on top of the RENT is much greater than the FAIRTAX on to of the mortgage payment. A homeowner's FairTax DECLINES as their mortgage is paid off, while the renter's FairTax keeps going up and up.
And the going rate for RENTALS is greater than the going rate for PURCHASE. It's like paying a short-term premium
My gripe here is that the FAIRTAX on top of the RENT is much greater than the FAIRTAX on to of the mortgage payment. A homeowner's FairTax DECLINES as their mortgage is paid off, while the renter's FairTax keeps going up and up.
uhm...not really
I bought my house in 1995 for 150k...the current """RESALE value"""( which is what the property tax is based off) is 450k
Last edited by workingclasshero; 02-27-2013 at 12:14 PM..
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