FairTax Act of 2025
FairTax Act of 2025
Plain Language Summary
# FairTax Act of 2025 Summary **What It Would Do** The FairTax Act would fundamentally overhaul the U.S. tax system by replacing federal income taxes, payroll taxes, and estate/gift taxes with a new 23% federal sales tax (calculated as 30% if you include the tax in the price). The bill would also eliminate the Internal Revenue Service. The sales tax would begin in 2027 and be administered primarily by individual states rather than a federal agency. The tax rate would adjust annually based on revenue needs for Social Security, Medicare, and general government operations. **Who It Affects and Key Provisions** This would impact virtually all Americans and businesses. The bill exempts business purchases and investments from the sales tax, meaning consumers would pay the tax primarily on personal goods and services.
To help lower-income families, the bill provides a monthly rebate to qualified families equal to the poverty level multiplied by the sales tax rate. To receive the rebate, family members must have a Social Security number and be lawful U.S. residents. **Current Status** The bill is currently in committee, meaning it has been introduced but has not yet been debated or voted on by the full House of Representatives. It was sponsored by Rep. Buddy Carter (R-GA).
CRS Official Summary
FairTax Act of 2025This bill replaces federal income, payroll, estate, and gift taxes with a federal sales tax beginning in 2027 and eliminates the Internal Revenue Service.The bill establishes a 23% tax-inclusive (30% tax-exclusive) federal sales tax rate on taxable property and services to be administered primarily by each state. The federal sales tax rate is adjusted annually beginning in 2028 so that it is the sum of the general revenue rate (14.91%);old-age, survivors and disability insurance rate; andhospital insurance rate. The bill includes exemptions for property or services purchased for business, investment, and certain state government functions.Registered, qualified families may receive a monthly sales tax rebate in the amount of the monthly federal poverty level (or twice such amount for married individuals) multiplied by the federal sales tax rate. Each family member must have a Social Security number and be a lawful resident of the United States. Federal sales tax revenues are allocated to general revenue, the Social Security trust funds, and the Medicare trust funds. (Special allocation rules apply for 2027.)The bill eliminates appropriations for the Internal Revenue Service after FY2029 and establishes an Excise Tax Bureau and a Sales Tax Bureau within the Department of the Treasury. Finally, the bill terminates the federal sales tax if the Sixteenth Amendment to the Constitution (authorizing a federal income tax) is not repealed within seven years from the date the bill is enacted.
Latest Action
Referred to the House Committee on Ways and Means.