- Thanks Jim, Your illustration helps to clear up my question. I am going to have to study the business use conversion credit. I seem to recall at one of our meetings I heard that new construction builder associations were generally favorable to the Fair Tax. Is my memory correct?ThanksDaveOn Nov 30, 2007, at 5:45 AM, Jim Bennett wrote:Hi Dave,I agree. Your terminolgy is better. I should substitute "cost of lot" and "construction costs." Under the example, the cost of the lot to the builder under the Fair Tax is only $77,000 because the builder gets a $23,000 business use conversion credit if he buys the lot from a private individual. The $61,600 is today's $80,000 construction costs less the savings on embedded taxes under the Fair Tax (if the embedded costs are 23%). Therefore, the builders' costs under the Fair Tax are $138,600 ($77,000 for the lot plus $61,600 construction costs). Add on whatever profit margin you want the builder to get and divide the sum by 0.77 (= 1.0 minus 0.23) and you get the sales price - Fair Tax inclusive. Does this make more sense now?I was trying to get an apples-to-apples comparison between new houses today and new houses under the Fair Tax to show people that there won't be much difference. People think you add 30% onto the cost of a new house today, which does not take embedded tax costs into consideration, and they go apoplectic!~Jim
-----Original Message-----

**From:**David Corsi [mailto:dcorsi3119@ comcast.net]**Sent:**Wednesday, November 28, 2007 10:10 PM**To:**njfairtax@yahoogrou ps.com**Subject:**Re: [njfairtax] New Houses under the Fair TaxHi Jim,

When I responded before I did not see your illustration sorry about

that. I do have some questions and comments:

1) The terms "Builder buys house for $100,000 " and "Cost of House"

is confusing. Do you mean; $100,000 is the cost of the lot?

If a builder buys a house he not doing new construction, instead he

is a rehabber which is "used property and therefore exempt from the

Fair Tax, correct?

2) "Value added to House" : I am assuming this is the cost of

construction?

3) If so, total cost (building and "soft costs) is $180,000. Builder

looking for a $20,000 profit = $200,000 Sales Price

I would change the terminology mentioned above (i.e. $100,000 Cost

of Lot and $80,000 cost of construction) . I believe most people in the

audience would understand those terms more readily and make it easier

to follow your illustration.

To be honest, I was always confused as to how the Fair Tax is

calculated on new construction and mortgages, rent etc.

Would it not be:

$100,000 Cost of Lot

$61,600 Builders cost less embedded taxes ( $80,000 x .23 =

$18,400. $80,000 -$18,400 = $61,600)

$20,00 Builders Profit

$181,600 Total Cost

Would the Purchaser would pay $41,768 in tax ($181,600 x .23?) plus

$181,600 = $223,368.

Is this correct? Also if the buyers take out a mortgage how is that

calculated?

Thanks Dave

On Nov 28, 2007, at 6:19 AM, Jim Bennett wrote:

> <House Illustration. pdf> - Thanks BillDaveOn Dec 1, 2007, at 6:21 PM, Bill Rollyson wrote:
David,

The Associated General Contractors of America have endorsed the FairTax in the past. (www.agc.org) While I donâ€™t see anything on their website about that support currently, I spoke to them last year and they do still support it. Also, here is testimony by AGC in support of the FairTax to the tax reform commission in 2005. http://www.taxrefor mpanel.gov/ comments/ _files/taxpanelt estimony. doc

Bill

-----Original Message-----

**From:**njfairtax@yahoogrou ps.com [mailto:njfairtax@ yahoogroups. com]**On Behalf Of**David Corsi**Sent:**Saturday, December 01, 2007 9:58 AM**To:**njfairtax@yahoogrou ps.com**Subject:**Re: [njfairtax] New Houses under the Fair TaxThanks Jim, Your illustration helps to clear up my question. I am going to have to study the business use conversion credit. I seem to recall at one of our meetings I heard that new construction builder associations were generally favorable to the Fair Tax. Is my memory correct?

Thanks

Dave

On Nov 30, 2007, at 5:45 AM, Jim Bennett wrote:

Hi Dave,

I agree. Your terminolgy is better. I should substitute "cost of lot" and "construction costs." Under the example, the cost of the lot to the builder under the Fair Tax is only $77,000 because the builder gets a $23,000 business use conversion credit if he buys the lot from a private individual. The $61,600 is today's $80,000 construction costs less the savings on embedded taxes under the Fair Tax (if the embedded costs are 23%). Therefore, the builders' costs under the Fair Tax are $138,600 ($77,000 for the lot plus $61,600 construction costs). Add on whatever profit margin you want the builder to get and divide the sum by 0.77 (= 1.0 minus 0.23) and you get the sales price - Fair Tax inclusive. Does this make more sense now?

I was trying to get an apples-to-apples comparison between new houses today and new houses under the Fair Tax to show people that there won't be much difference. People think you add 30% onto the cost of a new house today, which does not take embedded tax costs into consideration, and they go apoplectic!

~Jim

-----Original Message-----

**From:**David Corsi [mailto:dcorsi3119@ comcast.net]**Sent:**Wednesday, November 28, 2007 10:10 PM**To:**njfairtax@yahoogrou ps.com**Subject:**Re: [njfairtax] New Houses under the Fair TaxHi Jim,

When I responded before I did not see your illustration sorry about

that. I do have some questions and comments:

1) The terms "Builder buys house for $100,000 " and "Cost of House"

is confusing. Do you mean; $100,000 is the cost of the lot?

If a builder buys a house he not doing new construction, instead he

is a rehabber which is "used property and therefore exempt from the

Fair Tax, correct?

2) "Value added to House" : I am assuming this is the cost of

construction?

3) If so, total cost (building and "soft costs) is $180,000. Builder

looking for a $20,000 profit = $200,000 Sales Price

I would change the terminology mentioned above (i.e. $100,000 Cost

of Lot and $80,000 cost of construction) . I believe most people in the

audience would understand those terms more readily and make it easier

to follow your illustration.

To be honest, I was always confused as to how the Fair Tax is

calculated on new construction and mortgages, rent etc.

Would it not be:

$100,000 Cost of Lot

$61,600 Builders cost less embedded taxes ( $80,000 x .23 =

$18,400. $80,000 -$18,400 = $61,600)

$20,00 Builders Profit

$181,600 Total Cost

Would the Purchaser would pay $41,768 in tax ($181,600 x .23?) plus

$181,600 = $223,368.

Is this correct? Also if the buyers take out a mortgage how is that

calculated?

Thanks Dave

On Nov 28, 2007, at 6:19 AM, Jim Bennett wrote:

> <House Illustration. pdf> - Dave,The business use conversion credit is Title II, Section 202 of the bill. Here's the plain English summary of the bill.Regards,~Jim
-----Original Message-----

**From:**David Corsi [mailto:dcorsi3119@...]**Sent:**Saturday, December 1, 2007 09:58 AM**To:**njfairtax@yahoogroups.com**Subject:**Re: [njfairtax] New Houses under the Fair TaxThanks Jim, Your illustration helps to clear up my question. I am going to have to study the business use conversion credit. I seem to recall at one of our meetings I heard that new construction builder associations were generally favorable to the Fair Tax. Is my memory correct?

ThanksDaveOn Nov 30, 2007, at 5:45 AM, Jim Bennett wrote:Hi Dave,I agree. Your terminolgy is better. I should substitute "cost of lot" and "construction costs." Under the example, the cost of the lot to the builder under the Fair Tax is only $77,000 because the builder gets a $23,000 business use conversion credit if he buys the lot from a private individual. The $61,600 is today's $80,000 construction costs less the savings on embedded taxes under the Fair Tax (if the embedded costs are 23%). Therefore, the builders' costs under the Fair Tax are $138,600 ($77,000 for the lot plus $61,600 construction costs). Add on whatever profit margin you want the builder to get and divide the sum by 0.77 (= 1.0 minus 0.23) and you get the sales price - Fair Tax inclusive. Does this make more sense now?I was trying to get an apples-to-apples comparison between new houses today and new houses unde! r the Fa ir Tax to show people that there won't be much difference. People think you add 30% onto the cost of a new house today, which does not take embedded tax costs into consideration, and they go apoplectic!~Jim-----Original Message-----

**From:**David Corsi [mailto:dcorsi3119@ comcast.net]**Sent:**Wednesday, November 28, 2007 10:10 PM**To:**njfairtax@yahoogrou ps.com**Subject:**Re: [njfairtax] New Houses under the Fair TaxHi Jim,

When I responded before I did not see your illustration sorry about

that. I do have some questions and comments:

1) The terms "Builder buys house for $100,000 " and "Cost of House"

is confusing. Do you mean; $100,000 is the cost of the lot?

If a builder buys a house he not doing new construction, instead he

is a rehabber which is "used property and therefore exempt from the

Fair Tax, correct?

2) "Value added to House" : I am assuming this is the cost of

construction?

3) If so, total! cost (b uilding and "soft costs) is $180,000. Builder

looking for a $20,000 profit = $200,000 Sales Price

I would change the terminology mentioned above (i.e. $100,000 Cost

of Lot and $80,000 cost of construction) . I believe most people in the

audience would understand those terms more readily and make it easier

to follow your illustration.

To be honest, I was always confused as to how the Fair Tax is

calculated on new construction and mortgages, rent etc.

Would it not be:

$100,000 Cost of Lot

$61,600 Builders cost less embedded taxes ( $80,000 x .23 =

$18,400. $80,000 -$18,400 = $61,600)

$20,00 Builders Profit

$181,600 Total Cost

Would the Purchaser would pay $41,768 in tax ($181,600 x .23?) plus

$181,600 = $223,368.

Is this correct? Also if the buyers take out a mortgage how is that

calculated?

Thanks Dave

On Nov 28, 2007, at 6:19 AM, Jim Bennett wrote:

> <House Illustration. pdf>