FairTax Overview
6) The FairTax delivers a tax holiday on IRAs and other tax-deferred plans.
Forty percent of seniors have IRAs. The income tax imposed on investment income and pension
benefits or IRA withdrawals is repealed. No form of savings or investment is taxed. Pension funds,
IRAs, and 401(k) plans had assets of $13 trillion in 2010.59 An income tax deduction was taken for
contributions to most of these plans. All beneficiaries and owners of these plans expected to pay income
tax on them upon withdrawal, but are not required to do so once the income tax is repealed. Roth IRA
owners and post-tax retirement savers break even.
7) The FairTax allows seniors to sell their homes and pay no capital gains taxes.
The FairTax plan imposes a sales tax on newly constructed homes but exempts existing homes and other
used property from any sales tax. Currently, equity payments on homes must be paid from after-income
tax earnings (i.e., principal payments are not deductible). The purchase of existing housing is thus
subject to the income tax. The value of existing homes will appreciate due to the repeal of the income
tax and implementation of the FairTax. An important benefit as seniors have dramatically higher home
ownership rates than other age groups (89.7 percent for seniors compared to 68.4 percent on average in
2011).60 Homes are often a family’s largest asset.
8) The FairTax lowers average remaining lifetime tax rates.
Average remaining lifetime t