Yes, I've never seen anything from the FairTax advocates that adequately deals with its problem of double taxation on retirees.
The "prebate" system tries to deal with the effect it would have on people that need to spend more of their income on essential purchases, so I'll grant them that, even whatever this system is isn't perfect. And I don't like the idea the the fed thinks they have the right of prima nochte on my paycheck.
But retiree funds? This must be addressed. And no, the IRS won't be abolished - someone will have to enforce the system, and thus be granted enforcement powers, no matter what the system is.
OF course...complaining about "double taxation" of retirees is a little misleading. You are only going to get taxed on what you spend, and you will benefit financially from having the hand of feds removed from the pockets of all of us.
Frankly, as the power of the government increases, spending will go up and they will find a way to relieve you of your comfortable retirement (shame on you for having more than social security provides!). So it is in your interest to campaign for this change in the way the tax system works.
Here's a thought: It's great you survived the oppressive burden of the state to reach retirement. Tell me, how much larger would your poke be if you had not had to pay income tax to get to it? Even with the fair tax? I bet you got cheated, buddy.
Don’t forget that the FairTax wraps SS/M funding into itself, either. So retirees that have contributed their entire working lives end up paying on all their purchases to feed the SS and Medicare beast all over again.
And contrary to your view that the prebate is a good thing in that it negates the spending up to poverty level spending, I take the opposite view. To whit, that it is a BAD thing to try to untax anybody for the general fund spending that is in fact necessary — defense, judiciary, etc. Why should the poor not have to pay for national defense, judiciary, federal prisons, interstate highway systems, etc. ? The prebate would do more than make those things free to the poor. It would give them credit for SS/M benefits even though they would end up paying zero in SS/M taxes after the prebate negates all the FairTax for them.
I’d like to get rid of the IRS also. I’d like to eliminate the tax overhead on businesses. I’d like to get the benefits of the FairTax without the problems it has. I would do that by leaving SS/M as it is, eliminating the prebate to make sure everybody contributes to the general fund spending, and use a rate of 12% to reduce the evasion that higher rates would cause. 12% FairTax with no prebate would bring in enough revenue to completely replace the personal and corporate income taxes.
As far as the other effects on retiree savings goes, a 12% rate would not be much different net than what we’d pay under the existing system. Keep in mind that most retiree savings will be taxed at higher than 12% when withdrawn if it was in IRA or 401k accounts. The exception is Roth IRAs. Even regular savings accounts will be taxed on the earnings each year.
You will no longer be full income rates on interest-bearing savings and nonqualified dividends. Nor will you pay capital gains taxes. In addition, the items retirees buy all the time will not have multiple tiers of taxation built in during the process of producing them.