You can’t dig yourself out of a hole and America can’t borrow it’s way out of a recession.

If the goal is to increase wages through tax reform, we need to be utilizing land value taxation. That may not seem like a straight line, but the dots do connect.

And when we tax land value — even if we tax it heavily — not a single acre is going to leave town. Not a penny of value will be taken from an individual who created that value; rather we will be collecting back for the commons value created by all of us. The only incentive effects are positive ones: those who are sitting on unused land in choice neighborhoods, waiting for someone to do something that will make them rich, will stop waiting, because their carrying costs will have risen above trivial to the point where either they themselves will be motivated to do something productive with that choice site, or they will be motivated to lower their asking price, allowing someone else to do some useful with that land. Either way, putting land to productive use creates jobs — first in construction, and then in the buildings that get created — be they residential or commercial or mixed.

And all that economic activity will create a demand for labor which will drive wages upward. But with the higher land tax, workers won’t be speculating in land, so the choice land will be held only by those actively putting it to use.

Sounds far more like the kind of society I’d like to live in, and which I’d like to leave for my children and grandchildren.

Yes, it’s true that landlords will have their tax deductions go away, but they’ll also have their income/FICA tax go away, and the operational costs will decline because the landlord will no longer be paying the embedded taxes associated with the maintenance and repairs of the home. As a business, the apartment complex would pay NO taxes (nor would they pay costs associated with complying with a horrendously complex tax code).

If a landlord decided to raise rents, there’d be another that would decide to keep rent the same or raise it just a little bit. At the same time, the person renting would no longer be paying income tax (they may not have paid that before) and wouldn’t have to pay 7.65% to FICA — notorious for hurting the poor the most. The employer of the renter would also not have to pay the 7.65% FICA, so it would/could either lower the price it requires to make a profit, or it could raise the renter’s wage. Either way the renter benefits.

Also, don’t forget that with you addressing the landlord’s cost of living, wages will rise and/or prices will fall after the FT is enacted. The cost of living would not see an increase unless wages also increased for the Landlord.

And since tax cuts make rental properties more valuable, then you could also flip that and say that a lack of tax cuts make properties less valuable, making a home more affordable than it was before, maybe giving the renter an opportunity to buy eventually.

Therefore he will have less purchasing power under the FairTax than he has now, and will not be able to “afford” to reduce rents.

Even if landlords could afford to reduce rents, they have no competitive pressure to do so. The small landlord with, say, 1-4 units cannot afford vacancies, so he tries to keep his units fully rented. If your units are fully rented, it is illogical to reduce your rents.

If you’re a large landlord with, say, 100 units, you maximize profit at some occupancy rate below 100 percent: if you 100 units are fully rented, you’re not charging enough for maximum profit. For example, raising your rents 10 percent might result in 5 percent vacancy, increasing your net profit.

It takes a HUGE disruption in the rental market for rents to decrease significantly. The recently-ended real estate boom did cause such a disruption, as millions of renters were able to buy homes, often with toxic mortgages which are currently blowing up.

But tax cuts – not even California’s Proposition 13 which cut property taxes on average by more than half – have never resulted in lower rents.

Indeed, tax cuts make rental properties more valuable, which means they sell for higher prices, which means the new owners have a higher cost structure and cannot afford to reduce rents!

Now if you buy an existing home, under the FairTax, your purchase is not taxed. So if I rent an existing home (because I cannot buy one), why should my rent be taxed?

Services are taxed under the FairTax, and rent is considered a service and is therefore taxed – WHETHER THE PROPERTY IS NEW OR USED. (You can look it up.)

The current tax code allows landlords a writeoff for “depreciation” on rental properties. This affords many landlords a tax REDUCTION which would disappear under the FairTax.

Low-end rental housing has inelastic demand, so landlords will have no economic pressure to reduce rents. Historically, large property tax cuts did not result in lower rents, so why would anyone expecxt it to happen under the FairTax?

Remember that corporate taxes are already embedded in everything the states buy, so prices will be lowered (pre-FT) and then rise again as a result of the FT – I’m not saying it’s one for one, but it’s significant. If you factor in the economic growth that will happen as a result of eliminating the waste of income tax compliance and incentivizing individuals to invest, state coffers will be just fine.

>>You added payroll taxes to the mix and created a large class of an estimated 30 million Social Security net non-contributers due to the prebate feature, all of whom will still qualify for full pension and health care benefits.

I agree that the social security benefits/health benefits promised will bankrupt us if we stay on this current path. Moving to the FT would allow our economy to grow and seriously help us buy some time to fix those programs so we’re not saddle with so much debt that we can’t fund anything critical (national defense and infrastructure come to mind immediately).

>>You treated all current retirees very unfairly by forcing them to resume paying into the trust funds with their sales tax dollars.

They still pay income taxes now if they’re earning income — even paying Social Security (which the FT would remove). And keep in mind that the embedded taxes would go away.

>>You completely untaxed businesses, a major political mistake even though quite sensible.

It is quite sensible, and that’s why it’s worth fighting for even if it isn’t politically expedient. People have come around since the FT idea was first brought up. It’s gaining traction. When people understand that the consumer pays the corporate taxes with embedded taxes and that the shipping of jobs overseas is, to a large degree, due to our unfriendly corporate tax structure, they accept it quite readily.

>>You added gift and death taxes to the mix, and left yourself open to political criticisms that you are unfairly reducing the tax burden on the wealthy.

Wealth is spent and when it’s spent, it’s taxed. The portion that is not spent is invested in new ideas, inventions and initiatives which raise the standard of living of everyone. Those things create jobs. Let people criticize. When they understand the FT, they’ll stop criticizing (unless they have a vested interest in the tax code as it currently stands: lobbyists, politicians, and special interest groups)

>>You adopted a prebate, the largest cash grant entitlement in the history of the country at a time when entitlements are squeezing out discretionary spending, including critical Defense spending.

Agreed that our discretionary spending is being dangerously squeezed. The IRS currently estimates that it is paid 16% less than it’s owed — that’s not considering the illegals, drug dealers, gamblers, etc. that don’t pay any income tax. They would be added to the tax base. The prebate is there yes, but it is more than offset by the additional revenues. Remember, the FT has been studied and the object is for it to be revenue neutral. Once we get it passed, then we can work on government spending. Believe me, I am all for less spending and a strong defense.

>>You adopted an inventory tax credit which will contribute $600 billion to a staggering federal budget deficit in the first year of Fairtax implementation.

The pain is temporary and will go away when the FT boosts our economy and we see capital flow to this country like we’ve never seen before. Not just the repatriated money that would come flowing in, but the foreign corporations that would want to headquarter here because we would be the best business tax haven in the world. Remember, it’s set to be revenue neutral.

>>You excluded education tuition, thus allowing the “camel’s nose under the tent flap”. That precedent would certainly encourage future politicians to try to exclude such things as medical expenses, home ownership or anything else they might consider equally important to education tuition.

Tuition is seen as an investment, not an expense. While I have no doubt that we would see politicians try and get other special favors through for groups that help them buy votes, the FT would be vastly, infinitely, more transparent and we’d be able to sniff them out and kick them to the curb.

>>And finally, you chose a “cold turkey” implementation schedule. The Congress is basically conservative and far prefers evolutionary change to revolutions such as the Fairtax.

Just because something’s cold turkey doesn’t mean it’s not worth doing. A few things in our history were also cold turkey!