[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 25 Introduced in House (IH)]
<DOC>
119th CONGRESS
1st Session
H. R. 25
To promote freedom, fairness, and economic opportunity by repealing the
income tax and other taxes, abolishing the Internal Revenue Service,
and enacting a national sales tax to be administered primarily by the
States.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
January 3, 2025
Mr. Carter of Georgia (for himself, Mr. Clyde, Mr. Carter of Texas, Mr.
Perry, Mr. Burlison, Mr. Rutherford, Mr. Davidson, Mr. Biggs of
Arizona, Mr. Strong, and Mr. McCormick) introduced the following bill;
which was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To promote freedom, fairness, and economic opportunity by repealing the
income tax and other taxes, abolishing the Internal Revenue Service,
and enacting a national sales tax to be administered primarily by the
States.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``FairTax Act of
2025''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Congressional findings.
TITLE I--REPEAL OF THE INCOME TAX, PAYROLL TAXES, AND ESTATE AND GIFT
TAXES
Sec. 101. Income taxes repealed.
Sec. 102. Payroll taxes repealed.
Sec. 103. Estate and gift taxes repealed.
Sec. 104. Conforming amendments; effective date.
TITLE II--SALES TAX ENACTED
Sec. 201. Sales tax.
Sec. 202. Conforming and technical amendments.
TITLE III--OTHER MATTERS
Sec. 301. Phase-out of administration of repealed Federal taxes.
Sec. 302. Administration of other Federal taxes.
Sec. 303. Sales tax inclusive Social Security benefits indexation.
TITLE IV--SUNSET OF SALES TAX IF SIXTEENTH AMENDMENT NOT REPEALED
Sec. 401. Elimination of sales tax if Sixteenth Amendment not repealed.
SEC. 2. CONGRESSIONAL FINDINGS.
(a) Findings Relating to Federal Income Tax.--Congress finds the
Federal income tax--
(1) retards economic growth and has reduced the standard of
living of the American public;
(2) impedes the international competitiveness of United
States industry;
(3) reduces savings and investment in the United States by
taxing income multiple times;
(4) slows the capital formation necessary for real wages to
steadily increase;
(5) lowers productivity;
(6) imposes unacceptable and unnecessary administrative and
compliance costs on individual and business taxpayers;
(7) is unfair and inequitable;
(8) unnecessarily intrudes upon the privacy and civil
rights of United States citizens;
(9) hides the true cost of government by embedding taxes in
the costs of everything Americans buy;
(10) is not being complied with at satisfactory levels and
therefore raises the tax burden on law-abiding citizens; and
(11) impedes upward social mobility.
(b) Findings Relating to Federal Payroll Taxes.--Congress finds
further that the Social Security and Medicare payroll taxes and self-
employment taxes--
(1) raise the cost of employment;
(2) destroy jobs and cause unemployment; and
(3) have a disproportionately adverse impact on lower
income Americans.
(c) Findings Relating to Federal Estate and Gift Taxes.--Congress
finds further that the Federal estate and gift taxes--
(1) force family businesses and farms to be sold by the
family to pay such taxes;
(2) discourage capital formation and entrepreneurship;
(3) foster the continued dominance of large enterprises
over small family-owned companies and farms; and
(4) impose unacceptably high tax planning costs on small
businesses and farms.
(d) Findings Relating to National Sales Tax.--Congress finds
further that a broad-based national sales tax on goods and services
purchased for final consumption--
(1) is similar in many respects to the sales and use taxes
in place in 45 of the 50 States;
(2) will promote savings and investment;
(3) will promote fairness;
(4) will promote economic growth;
(5) will raise the standard of living;
(6) will increase investment;
(7) will enhance productivity and international
competitiveness;
(8) will reduce administrative burdens on the American
taxpayer;
(9) will improve upward social mobility; and
(10) will respect the privacy interests and civil rights of
taxpayers.
(e) Findings Relating to Administration of National Sales Tax.--
Congress further finds that--
(1) most of the practical experience administering sales
taxes is found at the State governmental level;
(2) it is desirable to harmonize Federal and State
collection and enforcement efforts to the maximum extent
possible;
(3) it is sound tax administration policy to foster
administration and collection of the Federal sales tax at the
State level in return for a reasonable administration fee to
the States; and
(4) businesses that must collect and remit taxes should
receive reasonable compensation for the cost of doing so.
(f) Findings Relating to Repeal of Present Federal Tax System.--
Congress further finds that the 16th Amendment to the United States
Constitution should be repealed.
TITLE I--REPEAL OF THE INCOME TAX, PAYROLL TAXES, AND ESTATE AND GIFT
TAXES
SEC. 101. INCOME TAXES REPEALED.
Subtitle A of the Internal Revenue Code of 1986 (relating to income
taxes and self-employment taxes) is repealed.
SEC. 102. PAYROLL TAXES REPEALED.
(a) In General.--Subtitle C of the Internal Revenue Code of 1986
(relating to payroll taxes and withholding of income taxes) is
repealed.
(b) Funding of Social Security.--For funding of the Social Security
Trust Funds from general revenue, see section 201 of the Social
Security Act (42 U.S.C. 401).
SEC. 103. ESTATE AND GIFT TAXES REPEALED.
Subtitle B of the Internal Revenue Code of 1986 (relating to estate
and gift taxes) is repealed.
SEC. 104. CONFORMING AMENDMENTS; EFFECTIVE DATE.
(a) Conforming Amendments.--The Internal Revenue Code of 1986 is
amended--
(1) by striking subtitle H (relating to financing of
Presidential election campaigns); and
(2) by redesignating--
(A) subtitle D (relating to miscellaneous excise
taxes) as subtitle B;
(B) subtitle E (relating to alcohol, tobacco, and
certain other excise taxes) as subtitle C;
(C) subtitle F (relating to procedure and
administration) as subtitle D;
(D) subtitle G (relating to the Joint Committee on
Taxation) as subtitle E;
(E) subtitle I (relating to the Trust Fund Code) as
subtitle F;
(F) subtitle J (relating to coal industry health
benefits) as subtitle G; and
(G) subtitle K (relating to group health plan
portability, access, and renewability requirements) as
subtitle H.
(b) Redesignation of 1986 Code.--
(1) In general.--The Internal Revenue Code of 1986 enacted
on October 22, 1986, as heretofore, hereby, or hereafter
amended, may be cited as the Internal Revenue Code of 2025.
(2) References in laws, etc.--Except when inappropriate,
any reference in any law, Executive order, or other document--
(A) to the Internal Revenue Code of 1986 shall
include a reference to the Internal Revenue Code of
2025; and
(B) to the Internal Revenue Code of 2025 shall
include a reference to the provisions of law formerly
known as the Internal Revenue Code of 1986.
(c) Additional Amendments.--For additional conforming amendments,
see section 202 of this Act.
(d) Effective Date.--Except as otherwise provided in this Act, the
amendments made by this Act shall take effect on January 1, 2027.
TITLE II--SALES TAX ENACTED
SEC. 201. SALES TAX.
(a) In General.--The Internal Revenue Code of 2025 is amended by
inserting before subtitle B (as redesignated by section 104(a)(2)(A))
the following new subtitle:
``Subtitle A--Sales Tax
``Sec. 1. Principles of interpretation.
``Sec. 2. Definitions.
``Chapter 1. Interpretation; Definitions; Imposition of Tax; etc.
``Chapter 2. Credits; Refunds
``Chapter 3. Family Consumption Allowance
``Chapter 4. Federal and State Cooperative Tax Administration
``Chapter 5. Other Administrative Provisions
``Chapter 6. Collections; Appeals; Taxpayer Rights
``Chapter 7. Special Rules
``Chapter 8. Financial Intermediation Services
``Chapter 9. Additional Matters
``SEC. 1. PRINCIPLES OF INTERPRETATION.
``(a) In General.--Any court, the Secretary, and any sales tax
administering authority shall consider the purposes of this subtitle
(as set forth in subsection (b)) as the primary aid in statutory
construction.
``(b) Purposes.--The purposes of this subtitle are as follows:
``(1) To raise revenue needed by the Federal Government in
a manner consistent with the other purposes of this subtitle.
``(2) To tax all consumption of goods and services in the
United States once, without exception, but only once.
``(3) To prevent double, multiple, or cascading taxation.
``(4) To simplify the tax law and reduce the administration
costs of, and the costs of compliance with, the tax law.
``(5) To provide for the administration of the tax law in a
manner that respects privacy, due process, individual rights
when interacting with the government, the presumption of
innocence in criminal proceedings, and the presumption of
lawful behavior in civil proceedings.
``(6) To increase the role of State governments in Federal
tax administration because of State government expertise in
sales tax administration.
``(7) To enhance generally cooperation and coordination
among State tax administrators; and to enhance cooperation and
coordination among Federal and State tax administrators,
consistent with the principle of intergovernmental tax
immunity.
``(c) Secondary Aids to Statutory Construction.--As a secondary aid
in statutory construction, any court, the Secretary, and any sales tax
administering authority shall consider--
``(1) the common law canons of statutory construction,
``(2) the meaning and construction of concepts and terms
used in the Internal Revenue Code of 1986 as in effect before
the effective date of this subtitle, and
``(3) construe any ambiguities in this Act in favor of
reserving powers to the States respectively, or to the people.
``SEC. 2. DEFINITIONS.
``(a) In General.--For purposes of this subtitle--
``(1) Affiliated firms.--A firm is affiliated with another
if 1 firm owns 50 percent or more of--
``(A) the voting shares in a corporation, or
``(B) the capital interests of a business firm that
is not a corporation.
``(2) Conforming state sales tax.--The term `conforming
State sales tax' means a sales tax imposed by a State that
adopts the same definition of taxable property and services as
adopted by this subtitle.
``(3) Designated commercial private courier service.--The
term `designated commercial private courier service' means a
firm designated as such by the Secretary or any sales tax
administering authority, upon application of the firm, if the
firm--
``(A) provides its services to the general public,
``(B) records electronically to its data base kept
in the regular course of its business the date on which
an item was given to such firm for delivery, and
``(C) has been operating for at least 1 year.
``(4) Education and training.--The term `education and
training' means tuition for primary, secondary, or
postsecondary level education, and job-related training
courses. Such term does not include room, board, sports
activities, recreational activities, hobbies, games, arts or
crafts or cultural activities.
``(5) Gross payments.--The term `gross payments' means
payments for taxable property or services, including Federal
taxes imposed by this title.
``(6) Intangible property.--
``(A) In general.--The term `intangible property'
includes copyrights, trademarks, patents, goodwill,
financial instruments, securities, commercial paper,
debts, notes and bonds, and other property deemed
intangible at common law. The Secretary shall, by
regulation resolve differences among the provisions of
common law of the several States.
``(B) Certain types of property.--Such term does
not include tangible personal property (or rents or
leaseholds of any term thereon), real property (or
rents or leaseholds of any term thereon) and computer
software.
``(7) Person.--The term `person' means any natural person,
and unless the context clearly does not allow it, any
corporation, partnership, limited liability company, trust,
estate, government, agency, administration, organization,
association, or other legal entity (foreign or domestic).
``(8) Produce, provide, render, or sell taxable property or
services.--
``(A) In general.--A taxable property or service is
used to produce, provide, render, or sell a taxable
property or service if such property or service is
purchased by a person engaged in a trade or business
for the purpose of employing or using such taxable
property or service in the production, provision,
rendering, or sale of other taxable property or
services in the ordinary course of that trade or
business.
``(B) Research, experimentation, testing, and
development.--Taxable property or services used in a
trade or business for the purpose of research,
experimentation, testing, and development shall be
treated as used to produce, provide, render, or sell
taxable property or services.
``(C) Insurance payments.--Taxable property or
services purchased by an insurer on behalf of an
insured shall be treated as used to produce, provide,
render, or sell taxable property or services if the
premium for the insurance contract giving rise to the
insurer's obligation was subject to tax pursuant to
section 801 (relating to financial intermediation
services).
``(D) Education and training.--Education and
training shall be treated as services used to produce,
provide, render, or sell taxable property or services.
``(9) Registered seller.--The term `registered seller'
means a person registered pursuant to section 502.
``(10) Sales tax administering authority.--The term `sales
tax administering authority' means--
``(A) the State agency designated to collect and
administer the sales tax imposed by this subtitle, in
an administering State, or
``(B) the Secretary, in a State that is neither--
``(i) an administering State, nor
``(ii) a State that has elected to have its
sales tax administered by an administering
State.
``(11) Secretary.--The term `Secretary' means the Secretary
of the Treasury.
``(12) Taxable employer.--
``(A) In general.--The term `taxable employer'
includes--
``(i) any household employing domestic
servants, and
``(ii) any government except for government
enterprises (as defined in section 704).
``(B) Exceptions.--The term `taxable employer' does
not include any employer which is--
``(i) engaged in a trade or business,
``(ii) a not-for-profit organization (as
defined in section 706), or
``(iii) a government enterprise (as defined
in section 704).
``(C) Cross reference.--For rules relating to
collection and remittance of tax on wages by taxable
employers, see section 103(b)(2).
``(13) Tax inclusive fair market value.--The term `tax
inclusive fair market value' means the fair market value of
taxable property or services plus the tax imposed by this
subtitle.
``(14) Taxable property or service.--
``(A) General rule.--The term `taxable property or
service' means--
``(i) any property (including leaseholds of
any term or rents with respect to such
property) but excluding--
``(I) intangible property, and
``(II) used property, and
``(ii) any service (including any financial
intermediation services as determined by
section 801).
``(B) Service.--For purposes of subparagraph (A),
the term `service'--
``(i) shall include any service performed
by an employee for which the employee is paid
wages or a salary by a taxable employer, and
``(ii) shall not include any service