FairTax Act of 2025

Starting in 2027, this bill would end federal income, payroll, estate, and gift taxes. It would replace them with one national sales tax on most purchases for personal use, set at 23% built into the price (equal to 30% if added at checkout), with states handling most of the collection. Sellers would collect the tax at checkout and send it in. Purchases for business use, investment, and certain state government functions would not be taxed. Revenue would support the federal budget, Social Security, and Medicare, and the rate would be updated each year beginning in 2028.

Families could get a monthly payment to offset the tax on basic needs up to the federal poverty level. To receive it, families must register; each member must have a Social Security number and be a lawful U.S. resident; payments would be sent by the Social Security Administration. Funding for the IRS would end after 2029, and new Treasury offices would run the sales tax where needed. Social Security benefits would also be adjusted so cost-of-living increases reflect the sales tax. If the constitutional amendment that allows a federal income tax is not repealed within seven years, the national sales tax would end.

• Who is affected: People who buy goods and services for personal use; registered families seeking the monthly rebate; businesses that sell to consumers; and state tax agencies.
• What changes: You would pay federal tax at checkout instead of filing federal income taxes each year; some purchases for business or investment would not be taxed; and there are penalties for not paying or filing properly.
• When:
  • Starts January 1, 2027.
  • Annual rate updates begin in 2028.
  • IRS funding ends after 2029.
  • Ends if the income tax amendment isn’t repealed within seven years.