By screwing everyone who has already saved for their retirement throughout their lifetimes. Since the income tax doesn't tax those savings, the "Fair Tax" cultists have created this scheme to get at those moneys to help fund their "prebate" welfare scheme, the largest in history.
That'll learn 'em. The fools shouldn't have been saving their money in the first place.
This is one of the problems with the so-called “fair tax”. Sure.
But, a number of suggestions have been put forward to deal with this one-time situation. It is an objection, and a legitimate one to be sure, but it isn’t a STRUCTURAL defect, it is a practical problem that everyone has recognized and would have to be dealt with in any shift to a consumption tax.
It isn’t a deal breaker.