This bill, titled the "FairTax Act of 2025," aims to promote freedom, fairness, and economic opportunity by fundamentally restructuring the federal tax system. It proposes the complete repeal of all existing federal income taxes, payroll taxes (Social Security and Medicare), and estate and gift taxes. Concurrently, the bill mandates the abolition of the Internal Revenue Service (IRS) and the destruction of most federal tax records by the end of fiscal year 2029.

The core of the new system is a broad-based national sales tax, set at an initial rate of 23 percent of gross payments for taxable property and services, effective January 1, 2027. This tax applies to final consumption, with exemptions for business-to-business transactions, exports, and property purchased for investment purposes. The rate for subsequent years would be adjusted to fund general revenue, Old-Age, Survivors, and Disability Insurance, and Hospital Insurance at levels equivalent to the repealed taxes.

A significant provision is the establishment of a monthly family consumption allowance, provided as a sales tax rebate to qualified families. This rebate is calculated based on the national sales tax rate and the monthly poverty level, aiming to ensure that essential consumption up to the poverty line is effectively tax-free. The Social Security Administration would be responsible for administering these rebates, which can be delivered via direct deposit or smart cards.

The administration of the national sales tax would be primarily handled by individual states that enter into cooperative agreements with the Secretary of the Treasury. These "administering states" would collect and remit the tax, retaining a small administration fee. The bill outlines detailed rules for interstate allocation of sales tax revenue, taxpayer rights, penalties for non-compliance, and the establishment of a new Sales Tax Bureau within the Department of the Treasury to oversee federal administration in non-participating states and provide support.

To ensure the long-term viability of Social Security and Medicare, the bill directs the Social Security Administration to determine the specific sales tax rates necessary to generate equivalent revenue for these trust funds. A critical aspect of the bill is its sunset clause: if the Sixteenth Amendment to the U.S. Constitution, which authorizes federal income taxes, is not repealed within seven years of the bill's enactment, the national sales tax provisions will cease to apply, effectively reverting the tax system to its prior state.