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H.R.25 – FairTax Act: What It Could Mean for the Future of U.S. Taxation

We’re taking a closer look at the proposed U.S. Congressional Bill H.R. 25, also known as the FairTax Act. Our Co-Managing Partner, Bill Gagnon, shares his insights on how this legislation could reshape current tax systems.

Administrative Shifts Under the FairTax Act

  • State collection: State sales tax authorities would be responsible for collecting the federal sales tax in addition to their own state sales tax.
  • State administration fee: In exchange for administering the national sales tax, states would receive an administrative fee equal to 0.25% of the revenue they collect.
  • Administration in non-participating states: If a state does not have a sales tax or chooses not to contract with the Treasury, the Secretary of the Treasury would administer the national sales tax directly.
  • Prebate distribution: A monthly “prebate” would be provided to qualified households to offset tax on essential goods up to the poverty level. These prebates would be issued by the U.S. Treasury.
  • Abolition of the IRS: The bill proposes eliminating the IRS after fiscal year 2029 and replacing it with new bureaus for excise and sales taxes under the Treasury.
  • Collection by businesses: Businesses would collect the tax at the point of sale and remit it to the states. They would also receive a 0.25% “taxpayer administrative credit” for their participation in the process.