A. First, “prebate” is a word that describes a monthly check (or direct deposit) that every American with a Social Security number receives from the federal government. It is called a “prebate” because it is paid in advance, each month.
B. The prebate is designed to reimburse all Americans for taxes on goods and services up to the poverty level, depending on the size of the person’s family. These taxes are based on what a person spends (the “consumption allowance”), not on the person’s income.
C. The prebate is a necessary part of the FairTax legislation. It is what makes it fair, in that it “UNtaxes” everyone – poor people included – up to the poverty levels indicated in the chart below. Currently, everyone – poor people included – pay, without a rebate, embedded taxes on everything they buy. These embedded taxes are not reimbursed to the people as they would be with the FairTax, meaning that the FairTax is NOT a tax on the right to live as the current income tax is.
D. Everyone is responsible for paying the FairTax on spending on new goods and services above the poverty level. No exemptions, no exceptions.
Visitors to the country, underground business operators and illegal migrants will NOT receive the prebate but will pay the FairTax on all purchases of new goods or services.
For more information about the Prebate, download this pdf file from FairTax.org: http://www.fairtax.org/PDF/PrebateExplained2011.pdf