In "FairTax - The Advocates Strike Back" the author writes:
The FairTax treats everyone the same. There are no exemptions, or loopholes.
I would disagree. Specifically, it treats homeowners and renters differently. Buy an existing home and pay no taxes on your principal payments. Rent the same existing home, and pay tax indefinitely. Since the property taxes you bear are embedded in the rent you pay, you will be taxed on the property tax component of your rent. (The homeowner, of course, will never pay FairTax on the property taxes he pays.) A renter living in a house for 30 years will pay about three times more tax than a homeowner living in the same house for 30 years. Was the renter's consumption three times that of the homeowner?
I am confident that you, as an economist, are quite familiar with the concept of imputed rent. And there I see a huge "exemption or loophole" - homeowners get to consume without being taxed on their housing consumption, while renters are taxed on every dollar of their housing consumption.
A homeowner can spend more than a renter on housing, and also more on non-housing items, while paying less tax than a renter. Did the renter consume more than the homeowner?
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