Congress proposes replacing income tax with 23% sales tax, abolishing the IRS
H.R. 25 — FairTax Act of 2025 · Filed by Buddy Carter (R-GA) · 14 cosponsors · Introduced Jan 3, 2025 · Referred to committee
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What it does
This bill would replace the federal income tax, payroll taxes, and estate taxes with a 23% national sales tax (rising to a combined rate of ~29% after 2027 to fund Social Security and Medicare). The IRS would be abolished, and states would collect and administer the tax. Families would receive monthly rebates tied to the poverty level to offset the sales tax on basic consumption.
Why we flagged it
The bill's core mechanism is a wholesale replacement of the federal income tax system with a national sales tax administered by states, coupled with a family rebate. This is a fundamental structural tax reform, not a narrow carve-out or subsidy.
What the text implies
- The rebate mechanism requires annual family registration with Social Security numbers and lawful residency certification, creating a new federal-state identity-verification infrastructure and potential barriers for undocumented immigrants and those without stable addresses.
- Interstate commerce rules (section 405) create complex destination-based allocation disputes; the bill establishes a new federal Office of Revenue Allocation to arbitrate state revenue claims, centralizing power over tax revenue distribution in a new bureaucracy.
The full analysis lists 5 implications of this text.
Who stands to gain
High-income households and wealth accumulators (income tax elimination favors those with investment; Sellers and retailers (administrative credit of 0.25% of tax remitted); States (0.25% administration fee on tax collections)