The FairTax Act replaces all federal income, payroll, estate, and gift taxes with a 23 percent national sales tax starting in 2027. It eliminates the IRS and provides monthly rebates to families to offset tax on necessities. The sales tax ends if the Sixteenth Amendment is not repealed within seven years.
Latest Action
Referred to the House Committee on Ways and Means.
AI Summary
Plain-English explanation of this bill
The FairTax Act replaces all federal income, payroll, estate, and gift taxes with a 23 percent national sales tax starting in 2027. It eliminates the IRS and provides monthly rebates to families to offset tax on necessities. The sales tax ends if the Sixteenth Amendment is not repealed within seven years.
Last updated: 1/6/2026
Official Summary
Congressional Research Service summary
<p><strong>FairTax Act of 2025</strong></p><p>This bill replaces federal income, payroll, estate, and gift taxes with a federal sales tax beginning in 2027 and eliminates the Internal Revenue Service.</p><p>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 </p><ul><li>general revenue rate (14.91%);</li><li>old-age, survivors and disability insurance rate; and</li><li>hospital insurance rate. </li></ul><p>The bill includes exemptions for property or services purchased for business, investment, and certain state government functions.</p><p>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. </p><p>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.)</p><p>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. </p><p>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the federal sales tax if the Sixteenth Amendment to the Constitution (authorizing a federal income tax) is not repealed within seven years from the date the bill is enacted.</p>
Key Points
Main provisions of the bill
Replaces income, payroll, estate, and gift taxes with sales tax
Establishes 23 percent tax-inclusive national sales tax
Eliminates the Internal Revenue Service
Provides monthly rebates for families at poverty level
Terminates if 16th Amendment not repealed in seven years
How This Impacts Americans
Potential effects on citizens and communities
Americans would pay taxes at the point of purchase instead of through income withholding. The IRS would be eliminated. Families would receive monthly rebates to cover sales tax on basic necessities up to the poverty level.
Policy Areas
Primary Policy Area
Taxation
Related Subjects
Administrative law and regulatory procedures
Constitution and constitutional amendments
Department of the Treasury
Employment taxes
Executive agency funding and structure
Foreign and international corporations
Fraud offenses and financial crimes
Gambling
Games and hobbies
General taxation matters
+9 more
Scope & Jurisdiction
Jurisdiction Level
federal
Congressional Session
119th Congress
Citation Reference
25, 119th Congress (2025). "FairTax Act of 2025". Source: Voter's Right Platform. https://votersright.org/bills/118-hr-25
