The FairTax plan would replace all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue neutrality, and, through companion legislation, the repeal of the 16th Amendment.
It would abolish all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes, replacing them with one simple, visible, federal retail sales tax administered primarily by existing state sales tax authorities.
The FairTax would tax us only on what we choose to spend on new goods or services, not on what we earn.