Has the Fair Tax gotten rid of subsidies for the poor?

Q: Has the Fair Tax gotten rid of subsidies for the poor, becoming only consumption?
A: According to http://fairtax.org/prebate:

“Under the FairTax, all Americans consume what they see as their necessities of life free of tax. While permitting no exemptions, the FairTax (HR25/S122) provides a monthly, universal prebate to ensure that each family unit can consume tax-free up to the poverty level, with the overall effect of making the FairTax progressive in application. This is not an entitlement, but a rebate (in advance) of taxes paid – thus the term prebate. Everyone pays taxes at the cash register.”

The overall cost of the prebate “is less than one-half of the amount of tax expenditures (standard deductions, personal exemptions, Earned Income Tax Credit, mortgage interest and charitable contribution deductions, and various other tax preferences) doled out under the current federal income tax system that are repealed when the FairTax is enacted. For 2012, the total of all of these tax breaks is estimated to be $1.25 trillion.”

To summarize, the FairTax ensures all US citizens are treated equally and that no one pay any tax on their necessities. It’s not just “the poor” who qualify or receive the prebate, but every legal US citizen who registers for it. Furthermore, the FairTax and its prebate mechanism will replace numerous entitlement programs at a lower cost to tax paying Americans.

NOTE: Tax Expenditures are programs defined under the Income tax system which will be repealed when the FairTax is enacted. Nothing in the Fair Tax Act defines which tax expenditures they are, only that specific sections of the Internal Revenue Code (which include those tax expenditures) will be repealed.


I'm the grandson of an Underwood and have been mapping my Underwood Family Tree for a couple years now.

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Posted in FairTax, Poor, Prebate
2 comments on “Has the Fair Tax gotten rid of subsidies for the poor?
  1. kicker51 says:

    I don’t agree with your premise that the prebate is either a subsidy or a form of welfare. It is, quite simply, a return of money wrongfully collected. Since, under the FairTax, taxes are not collected on aggregated purchases below the poverty level, those taxes collected are return to the rightful owner, the tax payer.

    And since, by definition, everyone has expenditures of at least the poverty level, it is hard to argue that anyone is getting back monies that didn’t originally belong to them.

    • FairTaxer says:

      I agree with you 100%, Steve. Thank you for pointing that out. I don’t believe the prebate is either a subsidy or an entitlement; and it’s definitely not welfare. But to answer the question, the FairTax does not eliminate all subsidies for the poor (there’s still WIC, Food Stamps, and many other programs); which is why I simply stated “not entirely”.

      I hope my readers don’t make the same assumption. Although the FairTax prebate replaces many entitlement programs, it is not one itself.

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