ANOTHER REASON TO MOVE TO THE FAIRTAX—PURCHASING A HOME
Some critics of the FAIRtax assert that purchasing homes will be much more difficult for working Americans. They point to the fact that new homes, like other retail products, will be subject to the FAIRtax.
They excitedly point out that a $200,000 new home will cost $260,000 ($60,000 is 23% of $260,000). However, they ignore the fact that the purchase of a $200,000 previously owned home will not be subject to the FAIRtax like other used retail items, and will only cost $200,000.
Another thing they ignore is that, if the warnings of the real estate industry are correct, elimination of the federal income tax and the mortgage interest deduction will reduce prices of homes by at least 10%. This means that the previously owned $200,000 home will be sold for $180,000 and still not be subject to the FAIRtax.
NEW HOMES AND PREVIOUSLY OWNED HOMES SOLD IN 2017
When analyzing the impact of the FAIRtax on home purchases, it is important to understand the home market and what homes are sold. In 2017, there were a total of 614,000 new homes sold and 5,510,000 of previously owned homes sold.
This means that had the FAIRtax been in effect in 2017, over 88% of the homes purchased would not have been subject to the FAIRtax.
FINANCING
In 2017, 28.8% of homes purchased were made without any debt incurred. This means that 71.2% of homes purchased in 2017 required the buyers to obtain a mortgage.
When securing financing, generally the most important factor is the amount of disposable income the borrower has. Other factors are important like credit score, amount of other debts and the amount of the mortgage as a percentage of the value of the home.
Generally, lenders require that your total monthly debt including car loans, credit card bills, and student loans be no more than 36 percent of your gross monthly income. This is known as the debt-to-income ratio.
Of course, these guidelines were developed under the income/payroll tax system. This means that the lenders will need to revise their guidelines because instead of a borrower having his or her income reduced by income tax and payroll taxes, under the FAIRtax the borrower receives his or her entire paycheck.
UNDER CURRENT SYSTEM—HOW MUCH DO YOU HAVE TO EARN TO NET $1,000?
All taxes of every sort are on consumption. They reduce the amount that someone has to spend. The only issue is if the taxes are levied prior to consumption or at the time of consumption. Taxes under the income/payroll tax system are levied prior to consumption. The FAIRtax is levied at the time of consumption.
The following tables illustrate how much a person has to make in order to make a $1000 mortgage payment. The first table is for a person who is employed and had their income/payroll taxes withheld each pay period.
|
Amount Earned |
Federal Income Tax Rate |
Social Security/Medicare Tax |
Income Tax |
After Tax Amount |
|
$1,214.32 |
10% |
$92.89 |
$121.40 |
$1,000 |
|
$1,292.82 |
15% |
$98.90 |
$193.92 |
$1,000 |
|
$1,382.17 |
20% |
$105.73 |
$276.43 |
$1,000 |
The table below applies to the growing number of self-employed persons—a rapidly growing segment of the work force.
|
Amount Earned |
Federal Income Tax Rate |
Social Security/Medicare Tax |
Income Tax |
After Tax Amount |
|
$1,345.90 |
10% |
$205.92 |
$134.59 |
$1,000 |
|
$1,428.57 |
15% |
$218.57 |
$214.28 |
$1,000 |
|
$1,538.50 |
20% |
$235.38 |
$307.70 |
$1,000 |
Here are some points that these numbers illustrate:
- All purchasers of new homes and previously owned homes have to earn the above amounts in order to make a $1,000 payment;
- If the purchase price of the home was $200,000, the principal was paid in 200 equal payments (with no interest) and the combined federal tax rates stayed the same for 200 months, a very unlikely event, the W2 purchaser will have had to earn between $42,000 and $76,434 more than the $200,000 in payments.
- If the purchase price of the home was $200,000, the principal was paid in 200 equal payments (with no interest) and the combined federal tax rates stayed the same for 200 months, a very unlikely event, the self-employed purchaser will have had to earn between $69,180 and $107,700 more than the $200,000.
SAME FACTS BUT A HOME PURCHASED UNDER THE FAIRTAX
Because there is no withholding of federal tax under the FAIRtax, here is the same purchase under the FAIRtax:
- Because previously owned homes are not subject to tax under the FAIRtax, 88% of the homes purchased for $200,000 will require payment of $200,000 by either the self-employed or the W2 employed—a savings of from $42,000 to $107,700;
- For the 12% of new homes purchased for $200,000, they will require payments of an additional $60,000 ($60,000 is 23% of $260,000).
- These numbers do not assume any reduction in the price of the $200,000 home as predicted by the real estate industry if the income tax and mortgage interest deduction is ended.
CONCLUSION
While most politicians are not willing to express their views about the real purpose of the income tax code, sometimes they do. Here is a statement by long-time Ways And Means Member Charlie Rangel, “We all want a simpler code, but tax reform is about much more. It is about ensuring that everyone pays their fair share. The tax code is also used to promote behavior that we as a nation support, such as home ownership or charitable contributions.”
If Congress really wants to encourage home ownership, they should enact the FAIRtax. Almost all Americans will pay much less for their homes and the additional amount of their disposable income will allow them to obtain financing much easier.
The FAIRtax is better for everyone except the Swamp and their friends in Congress. This doesn’t mean that, after the passage of the FAIRtax, the Swamp will drain. It does mean that instead of trying to “hide” special benefits in the Internal Revenue Code, they will have to get bills enacted that provide benefits to their clients. This means they will be under much more scrutiny and all of us will more easily see when Congress is rewarding its friends with our money.
It is time to PASS THE FAIRTAX!
The truth is the truth. Remember, if we don't continue to tell the truth and demand a change, then this quote from George Orwell's 1984 may foretell our children's future:
“If you want a picture of the future, imagine a boot stamping on a human face—forever.”
WHAT CAN EACH OF US DO
Call up the local or D.C. offices of your House Member and two Senators and you can use the following script:
- I am sure that Representative ____ or Senator ____ is in favor of everyone obeying the income tax laws.
- After they assure you that their boss is not in favor of anyone breaking the law, ask if they are aware of the Cebula study showing $9 trillion of evaded income/payroll taxes over the next ten years.
- Since most will say they don’t believe their boss has seen the study, either drop off a copy or get an email address and send a copy to them for their boss.
- Say you are going to call back in a week and ask what the Representative or Senator is going to do to stop this evasion.
- In a week, call back and ask specifically what the Representative or Senator is going to do to enforce the law.
- They probably will say their boss believes that simplifying the income tax will handle the problem.
- Explain that when people evade income taxes, they are also evading the 15.3% payroll/Medicare tax and state income tax. So it is unlikely that they are going to pay 30% or 40% when they were paying 0% because they have already decided it is okay to cheat.
- Say that the only way to reduce evasion is to increase by tens or hundreds of thousands the number of comprehensive IRS audits done each year.
- Point out that Evaders do not self-identify by putting an “E” on their income tax return.
- 80% of the people likely to be audited are trying to comply, but they will be forced to endure these IRS audits as well.
- Ask if the Member is in favor of this?
- If they say no, then ask again how the Member proposes to stop people breaking the income tax laws.
- Then explain that the way to handle evasion without unleashing the IRS audits is the FAIRtax.
If you can see your Member or attend a town hall and ask these questions, you can be even more effective.
JUST WHO COULD POSSIBLY OPPOSE THE FAIRTAX?
A simple question with a a very provocative answer. We know that the FAIRtax will not only simplify the system of federal taxation but also help countless Americans in many ways. So why would anyone oppose the FAIRtax? Who would stand to loose something when most Americans stand to benefit so much? The FAIRtax Guys zero in on those few people who stand in the way of true tax reform and what their motives are. Could it be that they benefit from the current system? It’s not a pretty picture but The FAIRtax Guys are just the ones to paint the details for you.
LAST WEEK’S EPISODE You have probably heard about “Phase 2” of tax reform from the President and some members of Congress. Although we were hoping that Phase 2 would be the FAIRtax, it turns out that “tax extenders” are what they are talking about. In other words, more Congressional tinkering with an already broken system. The FAIRtax Guys explained what they mean by “tax extenders” and why the FAIRtax would make all this Congressional tinkering a thing of the past. Listen to FAIRtax Power Radio to keep up with the constant changes Congress is thrusting upon the American people.
PLEASE HELP US SPREAD THE WORD ABOUT THE FAIRTAX!
Telling your friends and relatives about our free weekly podcasts is a great way to help us garner more support. It is the American people who must demand REAL tax reform in Congress. We must inform America about the FAIRtax! Please help us.
Telling your friends and relatives about our free weekly podcasts is a great way to help us garner more support. It is the American people who must demand REAL tax reform in Congress. We must inform America about the FAIRtax! Please help us.
You can listen to FTPR on any platform - Mac or PC, iPhone or Android. And it’s 100% free.
Listen on Spreaker.com (http://bit.ly/2oesbk7), iTunes (http://apple.co/1Te8VdF) or iHeart Radio (http://bit.ly/2eqEG7y) on your computer or smartphone. The easiest way to listen to FTPR on your smartphone is by downloading the free FTPR app. Just search for “FAIRtax Power Radio” in your app store, download the app and start listening.
We post a new episode every Friday morning. Please listen and tell everyone you know about the FAIRtax Power Radio.
The FAIRtax: Once You Understand It, You’ll Demand It!
THE ELECTRONIC INTRODUCTION TO THE FAIRTAX - AMERICA’S BIG SOLUTION
America’s Big Solution is a basic introduction to the FAIRtax and is meant for people of any age. And you can download it to your tablet or smartphone right now.
Do you know someone who would like an introduction to the FAIRtax and would prefer to read about it rather than search online for Tweets, Posts and Shares? If so, America’s Big Solution is their best choice.
America’s Big Solution is an introduction to the FAIRtax written by Terry Tibbetts, author of A Spartan Game: The Life and Loss of Don Holleder, with help from Ron Maiellaro, President of the Florida FAIRtax Educational Association.
You can buy an electronic version of ABS as follows: AMERICA’S BIG SOLUTION is available for only $2.99 for the Amazon Kindle (http://amzn.to/1WIRHry), the Barnes & Noble Nook (http://bit.ly/1XeG8bH) and Apple iOS (http://apple.co/1tnqK0P).
You can purchase a print copy at the same Amazon link above for $9.25. Regardless of whether you choose the electronic format or the print format, you’ll find AMERICA’S BIG SOLUTION will give someone the boost they need to begin their study of the FAIRtax and the suggested resources to learn more. Buy AMERICA’S BIG SOLUTION now!
LINKS TO MORE INFORMATION
These links will help you promote and support the FAIRtax, make yourself familiar with the links below. We always do our best to keep our AFFT community up to date, and you can stay ahead of the curve using these convenient sites.
- The website of Americans for Fair Taxation (www.fairtax.org)
- Read the Summary of the Evasion Study.
- Welcome to the Online FAIRtax Community (member.fairtax.org)
- The website at which you can help make it happen. (www.bigsolution.org)
- The Facebook page for Americans for Fair Taxation
- The Facebook page for The FAIRtax Guys
- The Twitter page for Americans for Fair Taxation
- PopVox - Connecting people and lawmakers for more effective participation and better governing
- YouTube channel for AFFT
- The Official FAIRtax Logo Store (www.fairtaxlogostore.org)
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Thank you for staying FAIRtax strong!
