 Individuals under the current system who accumulated savings from ordinary income ( by choosing not to spend their money when the income was earned ) paid taxes on that income before it was placed in savings ( such as a Roth IRA or CD ) . When individuals spend above the poverty level with money saved under the current system , that spending would be subject to the FairTax . People living through the transition may find both their earnings and their spending taxed . Critics have stated that the FairTax would result in unfair double taxation for savers and suggest it does not address the transition effect on some taxpayers who have accumulated significant savings from after @-@ tax dollars , especially retirees who have finished their careers and switched to spending down their life savings . Supporters of the plan argue that the current system is no different , since compliance costs and " hidden taxes " embedded in the prices of goods and services cause savings to be " taxed " a second time already when spent . The rebate would supplement accrued savings , covering taxes up to the poverty level . The income taxes on capital gains , estates , social security and pension benefits would be eliminated under FairTax . In addition , the FairTax legislation adjusts Social Security benefits for changes in the price level , so a percentage increase in prices would result in an equal percentage increase to Social Security income . Supporters suggest these changes would offset paying the FairTax under transition conditions . 
