FairTax Act of 2025

The FairTax Act of 2025 would fundamentally restructure federal taxation if enacted. It would eliminate federal income taxes, payroll taxes, estate taxes, and gift taxes, replacing them with a 23% federal sales tax (calculated as 30% tax-exclusive) on most purchases. The tax would take effect in 2027 and be administered primarily by individual states rather than the federal government. The IRS would be eliminated, with its functions transferred to new Excise Tax and Sales Tax Bureaus within the Treasury Department.

The bill includes provisions intended to protect lower-income families through monthly rebates equal to the federal poverty level multiplied by the sales tax rate. Certain purchases would be exempt from the sales tax, including business and investment purchases and some state government functions. Sales tax revenues would be allocated to general federal revenue, Social Security trust funds, and Medicare trust funds. The bill currently remains in committee and has not been voted on by the full House. Notably, the legislation includes a provision that would terminate the sales tax if the Sixteenth Amendment to the Constitution, which authorizes the federal income tax, is not repealed within seven years of enactment.