The Grassroots Corner February 23rd, 2026

HOSTILE ARGUMENT: THE FAIRTAX IS UNFAIR TO THE POOR AND A WINDFALL FOR THE RICH – PART 1

 

        Today, we continue a series of articles about handling attacks on the FAIRtax and begin a mini-series on why the FAIRtax is anything but regressive. The loudest and most often heard criticism we hear about the FAIRtax is that it’s regressive. People instinctively believe that because it’s a sales tax, the FAIRtax will hurt the poor and will be a windfall for the rich. That may be true of the ordinary sales taxes people are familiar with, but the FAIRtax is not your ordinary sales tax.

        Their argument usually goes something like this. Suppose that Elon Musk, Jeff Bezos, and a single mom on SNAP stand in the checkout line at a grocery store with identical carts of groceries. If groceries were subject to a sales tax, each would pay the same amount of tax. However, the tax represents a much greater percentage of the single mom’s income than it does for Elon and Jeff. So in reality, she’s getting hit much harder than the billionaires, and that’s not right.

        If the FAIRtax were an ordinary sales tax, they’d be right. But again, the FAIRtax is not an ordinary sales tax. The economists who designed the FAIRtax understood that situation and implemented an elegantly simple but effective solution—the prebate.

        Under the FAIRtax, the tax that everyone pays at the cash register on their spending up to the poverty level is refunded monthly in the prebate. This advance refund is based strictly on household size, not income. There’s no means testing because both Elon and SNAP mom are entitled to buy their basic necessities tax free. We also want the SNAP mom to get a better-paying job without fear of losing the prebate through a means test.

        The result is that SNAP mom who spends at or near the poverty level pays little to no FAIRtax out of her own pocket. Elon and Jeff spend at a much higher level. Most of the FAIRtax they pay comes out of their own deep pockets. With no exemptions, loopholes, or deductions in the FAIRtax, there’s no way for big spenders to avoid paying their fair share.

        Some will argue that exempting basic necessities like food, clothing and medicine is the best way to protect low-income earners from excessive taxation. The first problem with that approach is a much more complex administration. Retailers would have to go through their entire inventory and mark every single item they sell as either exempt or not, often making judgment calls that may later turn out to be determined wrong.

        The second problem is that lobbyists will relentlessly seek to exempt their clients’ goods and services from the tax. Members of Congress seeking to fund their re-election campaigns will gladly sell those exemptions to the highest bidder. As exemptions pile up, the tax base narrows. The tax rate on non-exempt goods and services must rise to make up for the revenue shortfall the exemptions will cause. Clearly, taxing all retail goods and services and providing for an advance refund, or prebate, is a better approach.

        In Part 2 of this mini-series, we will discuss how eliminating the payroll and self-employment taxes makes the FAIRtax fair and helps you handle the criticism that the FAIRtax hurts the poor and helps the rich.
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