Sponsors (15)
The bill trades a simpler, consumption-based tax with higher take-home pay and potentially greater savings for large-scale fiscal and administrative upheaval: it would shift tax burdens toward consumption (hitting lower-income households harder), threaten Social Security/Medicare funding, and create significant legal, operational, and enforcement uncertainty during the transition.
Most taxpayers (individual filers and many small businesses) would no longer owe federal individual income and self-employment taxes and could see a simpler consumption-based tax regime, reducing filing burdens, lowering reporting to the IRS, and increasing take-home pay.
Employers could face lower payroll tax costs, which may reduce labor costs and encourage hiring or higher wages for workers.
Taxing consumption rather than income is likely to encourage saving and investment, potentially supporting capital formation and longer-term economic growth for savers and business owners.
Low- and middle-income households would likely pay a larger share of their income in a broad-based national sales tax and face higher prices on everyday goods, making the change regressive and increasing cost-of-living pressures for those least able to absorb them.
Social Insurance programs (Social Security and Medicare) risk funding shortfalls because payroll and dedicated income-tax revenues would be repealed or shifted to general revenues, potentially jeopardizing benefits or requiring large new appropriations.
Repealing large portions of the Internal Revenue Code, eliminating IRS authority, and reorganizing tax administration would create massive legal and administrative uncertainty, disrupt payroll and withholding systems, imperil processing of refunds/credits, and invite substantial litigation and transition costs.
Based on analysis of 10 sections of legislative text.
Repeals federal income, payroll, and estate taxes and establishes a national retail sales tax, effective Jan 1, 2027.
Official title: 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.
Introduced January 3, 2025 by Buddy Carter · Last progress January 3, 2025
Creates a federal overhaul of the tax system by repealing major parts of the Internal Revenue Code (personal income tax, payroll taxes, estate and gift taxes) and replacing them with a new national retail sales tax administered under a new Sales Tax subtitle and federal Sales Tax Bureau. Sets January 1, 2027 as the primary effective date, restructures tax administration and Social Security indexing to account for a national sales tax, and includes transitional rules tied to congressional repeal of the Sixteenth Amendment within seven years. The bill removes longstanding IRS authorities over income and payroll taxes, prescribes widespread conforming and technical changes across the Code, requires destruction of many federal tax records (with limited exceptions), and changes how cost-of-living adjustments for Social Security are calculated if the consumer price index does not include the new national sales tax.