This could be a killer for people with large families. Folding Social Security into it is dangerous, too, because the social security commitment is openended, and after decades of abortion there will be a huge bulge of retirees as the boomers grow older.
I would prefer gradual tax modification rather than sweeping reform all at once.
Michigan's FairTax Volunteer Team - Home The FairTax will ensure funding of Social Security and Medicare. The FairTax will make the economy much more dynamic and prosperous. Consequently, federal tax revenues will grow. This makes it less likely that federal budget pressures will require Medicare or Social Security benefit cuts. Under the FairTax, Social Security will operate exactly as it does today, except that its funds will come from the FairTax. And, research shows that consumption is a more stable revenue source than income.
As a group, seniors will do very well under the FairTax. Low-income seniors will be much better off under the FairTax than under the current income tax system. Seniors, like everyone else, will receive a monthly rebate, in advance of purchases, for taxes paid on the cost of necessities. There will be no more income tax on Social Security. There will be no more income tax on investment income and pension benefits or IRA withdrawals. Seniors who own existing homes stand to experience large capital gains due to the repeal of the income tax and implementation of the FairTax plan.
Prices at the cash register will go down under the FairTax (
including the cost of prescription drugs!). The price of every good or service we buy today is inflated by the cost of income and payroll taxes paid by workers and businesses. These costs are passed on to consumers in the form of higher prices. When income and payroll taxes are repealed, prices will come down 20 to 30 percent according to Dr. Dale Jorgenson, Chairman of the Harvard University Economics Department. Therefore senior citizens, like all Americans, will be able to buy more.
Government benefits, Social Security and Medicare funding will be ensured, tax deferred investments will now be tax-free, and savings, invested in stock, real estate, and some bonds will increase substantially in value. Most importantly, the FairTax will create wealth for all Americans providing tax-free dollars for tax-free savings, and for retirement, and thus providing money for future prescription drugs and nursing care.