This bill — known as the Fair Tax Act — would reform the tax code by eliminating the income tax on individuals and corporations, employment taxes, plus estate and gift taxes and replacing them with a 23 percent national sales tax starting in 2019. The sales tax rate would be adjusted in subsequent years and some exemptions would exist, such as the for the purchase of used or intangible property, or services purchased for business, export, or investment, and for state government purposes. A rebate from the sales tax called the Family Consumption Allowance would be available for U.S. residents and family members based on family size and poverty guidelines.
States would be responsible for administering, collecting, and remitting the sales tax to the Treasury Dept., as the Internal Revenue Service (IRS) would no longer receive funding for its operations after fiscal year 2021. Tax revenues would go to the following:
Old-age and survivors insurance trust fund;
Disability insurance trust fund;
Hospital insurance trust fund;
Federal supplementary medical insurance trust fund.
This national sales tax would be terminated if the Sixteenth Amendment to the Constitution (which authorizes an income tax) isn’t repealed within seven years of this bill’s enactment.