Consumers, Economists See MID Differently

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  1. Joseph Lolli, CCIM

    Instead of quibbling over the MID, how about scrapping the entire tax code and replacing it with the FairTax?

    Sure your mortgage deduction goes away, but then, so does the entire income tax code! The fact is that even though the FairTax makes the MID irrelevant, housing is not only more affordable but homebuyers will have more money with which to purchase their home.

    There are several reasons for this:
    • Most home sales are of existing homes, and unlike today, taxpayers can use untaxed earnings to buy existing homes.
    • Unlike the current tax code, the FairTax does not tax the earnings used to pay mortgage interest. Even if the MID offset 100% of income taxes, interest would still be paid with what the taxpayer has left over after payroll taxes are deducted.
    • Mortgage debt will be paid at a lower interest rate since the FairTax lowers the interest rate of such debt.
    • While the sale of a new home is taxed, the FairTax imposes a lower marginal rate of tax on the earnings used to buy that home. In addition, The FairTax removes all “embedded” tax costs of current construction by untaxing the businesses involved in home construction and producing building supplies. That reduces the price of a new home.
    • Unlike the current tax code, the FairTax fully untaxes capital gains from the sales of used or new property.
    • The FairTax enables homeowners to save for a home faster by not taxing savings, unlike today.
    • The FairTax improves the economy and increases national income by removing the drag the current system imposes on economic growth.
    • The FairTax currently has almost SEVEN DOZEN congressional cosponsors of HR-25 / S-13 while the closest competing tax reform bill, HR-1040, has only 10 congressional cosponsors in the House.

    The FairTax shifts tax decisions away from Congress. There is no role for tax lobbyists or policy experts (no exemptions or gimmicks to sell) and just like NAR’s lobbyists they have reacted by poo-poo the idea because without a complex tax code, there is no longer a reason to employ high priced lobbyists to “protect” your industry’s favorable tax treatment. Besides, if you are a broker or agent, you are probably self-employed and pay both sides of FICA taxes (13.5% today, 15.3% after 1Jan13). What if you didn’t have to pay income OR employment tax? With the FairTax, you would net more income by charging a 4% commission than you do now by charging your client a 6% commission. As Obama says, “Do the math”… Your combined income and employment taxes can easily exceed the discounted commission price. So what does that mean in the market? Lower prices to the consumer means a larger universe of homebuyers! And more $$$ in your pocket!

    Sure, sure, sure I know that the NAR lobbyists wants to preserve the MID, but what they are really saying is that they want to preserve their jobs!

    Okay, so let folks keep their MID… but the FairTax will take away the income tax from which to deduct the MID. So which would you rather have? A discount coupon (MID) for a lower tax? Or have no tax at all? Hey, this ain’t rocket science folks. States have been charging sales taxes since before Lassie was a puppy! So check this out! Google and read all about it.

  2. I support the Fair Tax because I think it is the only thing that will put us on the right track for the long term financial health of this nation.
    It treats all people equally, it takes power and influence away from lobbyists, and it devolves power from Washington, which is why, unfortunately, that I believe it will not be passed anytime soon.