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How
will the FairTax affect my investments?
The stock market, mutual funds and retirement funds will prosper
under the FairTax for both small and large investors, because corporations
will face lower operating costs and individuals will have more money
to save and invest. The FairTax will significantly enhance the retirement
savings of all Americans. Tax-free bonds will still be tax-free.
And in addition, all stocks, bonds and other investments will be
tax-free as well!
The FairTax
will greatly benefit real estate in a number of ways, starting with
the non-taxability of mortgage interest, which doubles the value
of the mortgage interest deduction over today's allowable deductions.
Taxpayers,
for the first time, will be able to pay interest with pre-payroll
and income tax dollars. Today, at best, taxpayers must pay mortgage
interest with after-payroll tax dollars. Under the FairTax, mortgage
interest rates will fall by 25 to 30%. For example, on a $150,000,
thirty-year home mortgage at an interest rate of 8 percent, the
monthly mortgage payment would be $1,112.64. On that same mortgage
at a 6 percent interest rate, the monthly payment would be $907.64.
The two-point decrease in interest rates in this instance would
result in a $73,800 cost savings over the life of the mortgage!
Under the
Americans for Fair Taxation plan, home ownership will be a possibility
for many who don't have that option under the current income tax
system. Lower interest rates, the repeal of the income tax, the
repeal of all payroll taxes, and the FairTax rebate will mean that
people will have more money to spend, as well as the opportunity
to become homeowners.
Currently,
interest rates will drop quickly by approximately 25% after passage
of the FairTax bill. Interest rates include compensation to the
lender for the tax that they must pay on interest. That is why taxable
bonds bear a higher interest rate than tax-exempt bonds. When the
tax on interest is removed, interest rates will drop toward today's
tax-exempt rate.
Under the current
system, savings and investments are taxed. Under the FairTax, savings
and investments will not be taxed at all. As Americans save more
money and businesses invest more in the world's only "zero tax"
advantaged country, the pool of funds in lending institutions will
grow, thereby causing the cost of borrowing funds to drop.
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