H.R. 25, also known as the FairTax Act, was proposed in the 118th Congress by House Republicans. The act, headed by Republican Rep. Earl “Buddy” Carter of Georgia, seeks to completely eliminate income taxes, payroll taxes, estate taxes and gift taxes in favor of a federal sales tax. In January 2023, the act was referred to the House Committee on Ways and Means, where it has not yet progressed. If this act is implemented, it will impose a twenty three to thirty percent sales tax nationwide, beginning in 2025.

The appeal of the FairTax Act is fairly straightforward: the act would eliminate income taxes and property taxes. Proponents of the bill emphasize the elimination of income taxes, stating that Americans will bring home their entire paychecks, unless a state implements its own income tax. This would place the burden of tax policy on individual states, not the federal government, a fact which appeals to the GOP. Additionally, the elimination of federal income taxes would eliminate the purpose of the IRS.

The primary drawback to the act is the shifting burden to different groups of taxpayers. The current tax structure in the United States utilizes income brackets, in which high-income households pay significantly more than low-income households, as they can afford necessities such as food and housing while still paying more taxes. With the FairTax Act, the burden of taxation falls on lower-income households. In the long term, this would demonstrate a shift in the nation’s wealth gap, as low-income families struggle to afford necessities and wealthy families build generational wealth. However, the FairTax Act does include a tax rebate for families living below the poverty line.

In addition to the burden the FairTax Act places on lower income households, there is also confusing information surrounding the text of the act itself. Many proponents of the act call the sales tax a twenty three percent tax, due to the language of the act. The act states that the sales tax in 2025 would be “23 percent of the gross payments for the taxable property or service,” but it is unclear whether that means the tax is twenty three percent, or if the tax is thirty percent, with the tax being twenty three percent of the total amount paid. For example, some sources cite a “$30 sales tax on every $100 purchase.” In this case, the sales tax itself is thirty percent, but thirty is only twenty three percent of $130 total purchase.

The FairTax Act of 2023 is not the first FairTax Act to reach the U.S. House of Representatives. A prior attempt at a FairTax Act was referred to the House Committee on Ways and Means in 2021, but did not progress any further. This attempt, in 2023, appears to follow the same pattern.