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Re: [njfairtax] New Houses under the Fair Tax

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  • David Corsi
    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
    Message 1 of 7 , Dec 1, 2007
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      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?
      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 Tax

      Hi 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>



    • Bill Rollyson
      David, The Associated General Contractors of America have endorsed the FairTax in the past. ( www.agc.org ) While I don t see anything
      Message 2 of 7 , Dec 1, 2007
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      • David Corsi
        Thanks Bill Dave ... Thanks Bill Dave On Dec 1, 2007, at 6:21 PM, Bill Rollyson wrote: David, The Associated General Contractors of America have endorsed the
        Message 3 of 7 , Dec 1, 2007
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          Thanks Bill

          Dave
          On 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 don’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 Tax

           

          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?

          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 Tax

          Hi 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>

           

           




        • Jim Bennett
          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 ... From: David
          Message 4 of 7 , Dec 1, 2007
          • 0 Attachment
            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 Tax

            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?

            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 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 Tax

            Hi 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>



             

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