What about people who already have saved after-tax money? What do you tell them now that their saved money is worth 20-30% less than it was the day before the FairTax was made the law of the land?
That is a definite problem, and I’ll admit I don’t have a good answer. I’m one of those folks set to get screwed by the change-over. If I oaid income tax on a Roth IRA, and I take that money out to buy a can of beans with the fair tax attached, I’m paying tax twice on the same money.
Any change in the tax system will be subject to that problem. I don’t see any way to get around it; either you build a whole new bureaucracy to distinguish pre-tax from post-tax money, or you just suck it up. Any transition has short-term pain, and that shouldn’t blind us to the long-term benefit.
I repeat, for emphasis, that I’m one of the folks who will pay the double-tax. I still think it’s worth it in the long run.