To promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national sales tax to be administered primarily by the States.
Sponsors
Legislative Progress
IntroducedMr. Carter of Georgia (for himself, Mr. Clyde, Mr. Carter …
Summary
What This Bill Does
This legislation (FairTax Act of 2025) completely replaces the federal income tax, payroll taxes, and estate/gift taxes with a 23% national sales tax on all goods and services. To prevent the tax from being regressive, every household receives a monthly 'prebate' equal to the sales tax on spending up to the poverty level. The IRS would be phased out and replaced with state-administered collection.
Who Benefits and How
Middle-class consumers benefit from elimination of income tax withholding and tax filing requirements. Businesses benefit from no corporate income tax, simpler compliance, and exemption for business-to-business purchases. Savers and investors benefit because investment income is no longer taxed until consumed. States receive administration fees for collecting federal sales tax. Tax preparers and accountants initially benefit from transition services. Wealthy individuals may benefit since accumulated wealth is only taxed when spent.
Who Bears the Burden and How
Consumers pay 23% sales tax on all purchases including housing, healthcare, and services. Low-income households face higher effective rates despite the prebate because they spend all income on consumption. State governments bear administrative costs of collection infrastructure. IRS employees lose jobs as the agency is phased out. Retailers bear collection, reporting, and remittance obligations. Service providers (lawyers, doctors, plumbers) must collect sales tax on services for the first time.
Key Provisions
- Repeals Subtitle A (income taxes), Subtitle B (estate/gift taxes), and Subtitle C (payroll taxes) of IRC
- Imposes 23% sales tax on all goods and services consumed in the United States
- Exempts business-to-business purchases from tax (intermediate sales exemption)
- Creates monthly family consumption allowance (prebate) based on poverty level
- Requires states to administer collection via cooperative agreements or federal backup
- Creates Sales Tax Bureau and Excise Tax Bureau in Treasury
- Sunsets entire law if 16th Amendment not repealed within 7 years
Evidence Chain:
This summary is derived from the structured analysis below. See "Detailed Analysis" for per-title beneficiaries/burden bearers with clause-level evidence links.
Primary Purpose
Replaces federal income, payroll, and estate taxes with a national retail sales tax of 23%, provides monthly rebates to families based on poverty levels, and requires repeal of the 16th Amendment within 7 years.
Policy Domains
Legislative Strategy
"Replace entire progressive income tax system with consumption-based flat tax, using prebate mechanism to address regressivity concerns while dramatically simplifying tax code and eliminating IRS"
Bill Structure & Actor Mappings
Who is "The Secretary" in each section?
- "the_secretary"
- → Secretary of the Treasury
- "the_secretary"
- → Secretary of the Treasury
- "sales_tax_administering_authority"
- → State tax authority or Federal Sales Tax Bureau
- "the_secretary"
- → Secretary of the Treasury
- "social_security_administration"
- → Social Security Administration
- "the_secretary"
- → Secretary of the Treasury
- "sales_tax_administering_authority"
- → State tax authority
- "the_secretary"
- → Secretary of the Treasury
- "sales_tax_administering_authority"
- → State or Federal tax authority
- "sales_tax_administering_authority"
- → State or Federal tax authority
- "the_secretary"
- → Secretary of the Treasury
- "the_secretary"
- → Secretary of the Treasury
- "the_secretary"
- → Secretary of the Treasury
- "social_security_administration"
- → Social Security Administration
- "the_secretary"
- → Secretary of the Treasury
Key Definitions
Terms defined in this bill
Any property or service purchased for use or consumption in the United States, excluding business-to-business purchases
The total amount paid for taxable property or services, including federal sales tax
Purchase of property or services for use in a trade or business, exempt from sales tax
One or more family members sharing a common residence, eligible for monthly prebate
A state that maintains a sales tax and enters into cooperative agreement with Treasury to collect federal sales tax
Sum of explicitly and implicitly charged fees by financial institutions, subject to special taxation rules
We use a combination of our own taxonomy and classification in addition to large language models to assess meaning and potential beneficiaries. High confidence means strong textual evidence. Always verify with the original bill text.
Learn more about our methodology