The FairTax is a tax reform proposal for the federal government of the United States that would replace all federal taxes on personal and corporate income with a single broad national consumption tax on retail sales. The Fair Tax Act (H.R. 25/S. 13) would apply a tax once at the point of purchase on all new goods and services for personal consumption. The proposal also calls for a monthly payment to all family households of lawful U.S. residents as an advance rebate, or "prebate", of tax on purchases up to the poverty level. First introduced into the United States Congress in 1999, a number of congressional committees have heard testimony on the bill; however, it has not moved from committee and has yet to have any effect on the tax system. In recent years, a tax reform movement has formed behind the FairTax proposal. Increased support was created after talk radio personality Neal Boortz and Georgia Congressman John Linder published The FairTax Book in 2005 and additional visibility was gained in the 2008 presidential campaign.
The sales tax rate, as defined in the legislation for the first year, is 23% of the total payment including the tax ($23 of every $100 spent in total—calculated similar to income taxes). This would be equivalent to a 30% traditional U.S. sales tax ($23 on top of every $77 spent—$100 total). The rate would then be automatically adjusted annually based on federal receipts in the previous fiscal year.
 With the rebate taken into consideration, the FairTax would be progressive on consumption, but would also be regressive on income at higher income levels (as consumption falls as a percentage of income). Opponents argue this would accordingly decrease the tax burden on high income earners and increase it on the middle class. Supporters contend that the plan would decrease tax burdens by broadening the tax base, effectively taxing wealth, and increasing purchasing power.
The plan's supporters believe that a consumption tax would have a positive effect on savings and investment, that it would ease tax compliance, and that the tax would result in increased economic growth, incentives for international business to locate in the U.S., and increased U.S. competitiveness in international trade. Opponents contend that a consumption tax of this size would be extremely difficult to collect, and would lead to pervasive tax evasion. They also argue that the proposed sales tax rate would raise less revenue than the current tax system, leading to an increased budget deficit. The plan is expected to increase cost transparency for funding the federal government, and supporters believe it would have positive effects on civil liberties, the environment, and advantages with taxing illegal activity and illegal immigrants. There are concerns regarding the proposed repeal of the Sixteenth Amendment, removal of tax deduction incentives, transition effects on after-tax savings, incentives on credit use, and the loss of tax advantages to state and local bonds.