[Polybius]

Now on to those pesky tax-deferred accounts... There is $12T sitting in accounts that have never had any income taxes paid on the earnings. The FairTax, as written, gives the holders of those accounts a massive windfall compared to the already-taxed accounts we've been discussing.

The so-called "Individual Retirement Accounts" had post-tax money put into them and the theory was that the money taken out would be allowed to be withdrawn tax-free. Those accounts will take a hit with the Federal Sales Tax but it is such a minor part of my portfolio that I don't pay much attention to it.

However, SEP's had pre-tax money put in that would be theoretically taxed upon withdrawl.

As it turns out, the effect under Fair Tax would be as if this money had been under Fair Tax all along. It would be earned without income tax (as under the Fair Tax), it would realize gains without tax (as under the Fair Tax), it would be withdrawn without tax (as under the Fair Tax) and then it would be charged a Federal Sales Tax when spent (as under the Fair Tax).

So, it seems that the way to deal with SEP's is to treat SEP money as if it had been Fair Tax era money all along.

[Kellis91789]

"The so-called "Individual Retirement Accounts" had post-tax money put into them and the theory was that the money taken out would be allowed to be withdrawn tax-free. Those accounts will take a hit with the Federal Sales Tax but it is such a minor part of my portfolio that I don't pay much attention to it."

That describes Roth IRA accounts, which is not part of the $12T. The $12T is in traditional IRA accounts, 401k accounts, pensions, etc. That money did not have any income tax paid on it.

I disagree that treating it as though it had been earned under the FairTax would be appropriate. I think it would represent a shifting of tax burden from rich to poor and will fuel a class warfare argument against the FairTax. I'd rather sidestep that landmine and use the revenue to lower the FairTax rate.