The FairTax Act of 2023 proposes a major overhaul of how the federal government collects taxes. Instead of income taxes, payroll taxes, and estate taxes, it would replace them with a single national sales tax set at 23% on most goods and services you buy. This means you'd pay the tax when you purchase things, rather than having it taken from your paycheck or owed when you sell property or pass money to heirs.

To help people afford this change, the government would send monthly rebate checks to families based on their size and income level—think of it as a cushion to offset the sales tax burden. Certain items wouldn't be taxed, including used goods, business purchases, exports, and items bought for investment purposes. States would handle collecting and sending the tax money to the federal government, similar to how some states currently collect sales tax.

The revenue from this sales tax would fund Social Security, Medicare, disability insurance, and other federal programs. There's an important catch: the IRS would be shut down after 2027, and the entire sales tax system would automatically disappear if the constitutional amendment allowing income taxes isn't repealed within seven years. Essentially, this bill is a bet-the-farm proposal that would completely transform the U.S. tax system, but it only works if the income tax amendment is formally eliminated from the Constitution.

FairTax Act of 2023

Carter, Earl L. "Buddy"

FairTax Act of 2023 This bill imposes a national sales tax on the use or consumption in the United States of taxable property or services in lieu of the current income taxes, payroll taxes, and estate and gift taxes. The rate of the sales tax will be 23% in 2025, with adjustments to the rate in subsequent years. There are exemptions from the tax for used and intangible property; for property or services purchased for business, export, or investment purposes; and for state government functions. Under the bill, family members who are lawful U.S. residents receive a monthly sales tax rebate (Family Consumption Allowance) based upon criteria related to family size and poverty guidelines. The states have the responsibility for administering, collecting, and remitting the sales tax to the Treasury. Tax revenues are to be allocated among (1) the general revenue, (2) the old-age and survivors insurance trust fund, (3) the disability insurance trust fund, (4) the hospital insurance trust fund, and (5) the federal supplementary medical insurance trust fund. No funding is authorized for the operations of the Internal Revenue Service after FY2027. Finally, the bill terminates the national sales tax if the Sixteenth Amendment to the Constitution (authorizing an income tax) is not repealed within seven years after the enactment of this bill.