The FairTax replaces the income tax with a national sales tax that does not tax the poor when they pay for the necessities of life. With the FairTax, workers would get all their pay including their current take home pay along with the income and FICA taxes.
Workers could also ask their employers to give them the health insurance premium money that employers currently pay. Workers would do this because without an income tax, there are no income tax subsidies for employers to own the workers health insurance policies.
Workers who got all their pay and also purchased health insurance would solve many problems such as:
- The portability problem because they would own their own insurance policies.
- They would save money by purchasing high deductible plans and the more money they saved, the higher the deductible they could afford.
- The FairTax would also make IRAs and employer pension plans meaningless because, without an income tax, workers get all their pay and can save tax-free. This would save workers the fear of having their pension plans raided as happens during bankruptcy proceedings. It would also tend to increase personal savings and this would allow them to save money by purchasing higher deductible insurance policies.
- When individuals own their own non-cancelable insurance policies, there would be much less of a preexisting illness problem.
- Insurance industry competition would create policies where workers could pick and choose their policies such as is done with life insurance and smokers. This would decrease the need for state government coverage mandates, which would increase competition across state lines.