The Grassroots Corner March 2nd, 2026

HOSTILE ARGUMENT: THE FAIRTAX IS UNFAIR TO THE POOR AND A WINDFALL FOR THE RICH – PART 2

 

        Today, we continue a series of articles about handling attacks on the FAIRtax and 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, the critics would be right.

        In Part 1 published in Grassroots Corner on February 23, 2026, we discussed how the prebate is one reason why the FAIRtax is not an ordinary sales tax. Today, we discuss another feature of the FAIRtax that makes it a great deal for low-income consumers: the elimination of the payroll and self-employment taxes. The payroll taxes that fund Social Security and Medicare/Medicaid are the most regressive in today’s federal tax inventory. These taxes hit workers like our SNAP mom, who is desperately trying to make ends meet on a minimum wage job. They don’t touch Elon, Jeff, and other high-income individuals who live primarily off investment income. Under the FAIRtax, Social Security and Medicare/Medicaid benefits remain, but they receive funds from sales tax revenue. Workers take home their paychecks free of federal withholding.

        The employer portion of payroll taxes also goes away. Why does that matter to workers? The employer portion of payroll taxes is a direct cost of hiring a worker and part of the employer’s hiring decision. Removing this tax enables the employer to either pay the employee more or make a more favorable decision to hire and keep the employee.

        By removing payroll, self-employment, and corporate income taxes, the FAIRtax goes a long way toward offsetting any additional price rise that the FAIRtax might cause for workers. But will prices really rise by the amount of the new tax as critics like to claim?  That’s a resounding “no”.

        The FAIRtax eliminates taxes on businesses, including business income and payroll taxes. While some will portray this as a huge tax break for wealthy corporations, basic economics paints a much different picture. The inconvenient truth that many people overlook is that corporate taxes are just like any other cost of doing business. They get passed on to consumers, employees and shareholders in the form of higher prices, fewer benefits and lower dividends. By eliminating corporate taxes, the FAIRtax reduces the cost of doing business dramatically. The competitive pressures in a free market economy will ensure that those savings get passed on as well.

        In the third and final part of this mini-series, we examine other features that make the FAIRtax fair and respond to the criticism that the FAIRtax is regressive.
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