Posted on 11/12/2002 11:46:28 PM PST by JohnHuang2
LOL
end of communism=end of Soviet Union...
I disagree. Even without the mortgage deduction advantage a sales tax puts in a better advantage to buying a house:
Income: 40,000
Income tax: none
20% sales tax one time on 100,000 house: 20,000
sales tax on 700/mo. rent over 20 years:33,600
A family taking home 40,000 can afford a 120,000 house as easily as a family taking home 32,000 can afford a 100,000 house. Plus, they save in taxes (discounting for time would reduce the advantage ,but increasing to 30 or 50 years would add to the advantage).
Also, you are forgetting one thing. Mortgages are based off of 10 year interest rates. 10-year treasury is currently about 4%. However, the income from coupon payments is taxable. Let's look at yield of a 10-year municipal bond that is not-taxable... It is 3.45%. All non-municipal bond yields would go down, because they would all be non-taxable. Your mortgage rate would drop by the appropriate percentage. You don't need a deduction.
In fact, the whole reason for the deduction in the first place is that the person receiving the interest from your mortgage payment must pay income tax on it. Therefore, it is unfair to collect income tax on the interest twice. Almost all business income is deductable. We as consumers get screwed because we cannot deduct interest income on cars, credit-cards, etc. They are double-taxed.
To sum up, interest rates would drop, so your mortgage rate would drop. Also, companies can borrow money cheaper. This is a good thing.
Undeniable Logic
OTOH, Communism still thrives, in some nations and this consumption tax has hidden flaws, that can ruin our economy. Remember the " LUXURY TAX " ?
And, don't forget, in Democrat cloakrooms ;^)
With the consumption tax in place, I have to hope that my buyer will show up and not have a heart attack, about getting a mortgage and paying a tax on the asked for sale price. Then, I, in turn, will have to pay a consumption tax on what I buy, and pay a percentage to the realestate lady; TWICE. Maybe I don't like THAT and decide to stay here, when I'd rather or need to get out of here. Multiply that scenario, all over the country and a HUGE problem arises.
Oh, and as I stated earlier, in the places , that I am familiar with, $100,000 will buy a shack; if you're lucky. So, let's say that it'ss only be the poor, who actually buy and sell homes. How much money would that bring in ?
Yes, a consumption tax WOULD get those on the " underground economy " to pay something ; at last. What it would also do, is to stop, stone cold dead in its tracks, wealthier people from buying very high end goods and services. There would also be some sort of new " underground economy " dealings. There always are.
Interest rates, BTW, are at an all time low, right now. That isn't helping the economy.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.