A consumption tax is a tax on what people spend, as opposed to an income tax on what people earn. As a retail sales tax, the Fair Tax is one form of a consumption tax.
In general, consumption taxes are more economically efficient than income taxes because they do not place an economic burden on investment or saving, but they do still place a burden on labor by reducing the after-tax return to work. Consumption taxes also tend to be regressive because lower-income households tend to spend more of their incomes than they save.
Source Tax Foundation
