 Income earned and saved would not be taxed until spent under the proposal . Households at the extreme high end of consumption often finance their purchases out of savings , not income . Economist Laurence Kotlikoff states that the FairTax could make the tax system much more progressive and generationally equitable , and argues that taxing consumption is effectively the same as taxing wages plus taxing wealth . A household of three persons ( this example will use two adults of any gender plus one child ; the rebate does not consider marital status ) spending $ 30 @,@ 000 a year on taxable items would devote about 3 @.@ 4 % of total spending ( [ $ 6 @,@ 900 tax minus $ 5 @,@ 888 rebate ] / $ 30 @,@ 000 spending ) to the FairTax after the rebate . The same household spending $ 125 @,@ 000 on taxable items would spend around 18 @.@ 3 % ( [ $ 28 @,@ 750 tax minus $ 5 @,@ 888 rebate ] / $ 125 @,@ 000 spending ) on the FairTax . At higher spending levels , the rebate has less impact and the rate approaches 23 % of total spending . Thus , according to economist Laurence Kotlikoff , the effective tax rate is progressive on consumption . 
