Renters and debtors are other groups which will lose under the FairTax proposal. Rent will be taxed, while principal payments on an existing home will be exempt. (New construction will be taxed, but not existing homes.) If two individuals occupy identical homes, and one is a homebuyer while the other is a renter, over a 30-year period (the term of the most common mortgage), the renter will pay three times as much tax on his housing consumption than will the homebuyer. A lifetime renter, will, of course, pay much more than that. Surely the renter did not consume three times as much housing than did the homeowner. (Indeed, the renter faced restrictions on the use of the property not faced by the homeowner, and thus received less utility.) This proposal would therefore transfer billions of dollars from renters to homeowners, and do so more explicitly than does the current tax code. Also, the property taxes embedded in rent will be taxed, while a homeowner's property taxes will not be taxed. And since half the states have higher taxes on rental property than on primary residences, a state tax penalty will be compounded by a federal tax penalty. Renters unable to buy homes will become a permanent underclass, stuck in a tax ghetto where they will pay higher taxes than homeowners while getting much less for their consumption dollars. Do not look to increased production to resolve this issue: apartments, trailers, and similar "affordable" housing for renters is considered undesirable by the homeowner majority and not welcome in many communities, and will not be permitted.
Also, since interest payments will be taxed, renters will be hit hard because they pay much higher interest rates than homeowners (e.g. 18% credit card vs. 6% HELOC or mortgage). Because tax will be extracted from debt payments, minimum payments will necessarily increase, and many debtors might find themselves unable to reduce the principal, and will remain in debt indefinitely.
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