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The services of the contractor repairing the old house would be FairTaxed, as would services on old cars, tailoring of old clothes, and tenant remodeling for business suites in old business buildings. It’s only tax-free if you buy the thing and repair it yourself.
Also, why would repaired items be considered less productive? They use less resources to be restored to the same utility as a new thing. Unless you’re talking GDP-style metrics?
How could that work? You said resold items are exempt.
I can sell my house to the plumber tax free, he can work on it (of course, paying FairTax on everything he buys from HomeDepot) and then sell it back to me for more, again, no tax. The difference in price minus the difference in supplies he purchased is the value-add from his skilled labor, which is untaxed.
They do use less resources, but they use much more labor per unit output because they don't have nearly the economies of scale. Or if you prefer more formally, labor is a kind of resource which is in a substitute relationship with physical resources.
This is not to say that repairing is bad! In many cases it makes sense, it's only that the tax system shouldn't have such a strong preference because it's distorting.
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First off restoring old things can be less productive than new things. They have components that don’t fit with new standards and working around them would be low productivity. Also factories are just more productive than one off jobs. So it’s not just GDP-style metrics.
Second, you would have a whole issue dealing with what’s new and what’s old. In an extreme example say your building a 70-story condo building and replacing an old bodega. Is it new or old if you build the new connecting and on top of the old? So you say that’s obvious new and that is maybe easy to define but you would have a huge scale of nuances to figure out the line. Which in other areas we deal with but there is going to be a gamification line.
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