Does the fair tax apply to purchase of a residence? Seems that this would put young people or those in high home price areas such as California at a big disadvantage. Otherwise if you are conservative in your spending as my house is, the fair tax is a great deal.
Does the fair tax apply to purchase of a residence? Seems that this would put young people or those in high home price areas such as California at a big disadvantage.
It applies only if it is a new residence. Used homes(previous owners) will not be taxed. Also with the elimination of federal income taxes will put more money in people's paycheck and consequently have more money to save. The prebate will cover the taxes on necessities(including shelter) up to the poverty level, reducing the tax rate from the maximum 23%.
Another aspect to consider is 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.
Fair Tax FAQ #21. Mortgage interest rates will fall as bank overhead falls.