What Happens to Various Groups after the FAIRtax is Enacted
In his 1934 book I, Candidate for Governor: And How I Got Licked, Upton Sinclair famously wrote:
"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"
The FAIRtax repeals federal individual and corporate income taxes, payroll taxes, and estate and gift taxes, and replaces them with a single, broad-based national retail sales tax administered by the states. The FAIRtax abolishes the IRS and eliminates the need to file both individual and corporate income tax returns.
The FAIRtax establishes a 23% tax-inclusive federal sales tax rate on the purchase of new, retail goods and services.
The following table delineates the primary structural shifts in the federal revenue model:
| Feature | Current Federal Tax System | FairTax (H.R. 25) |
| Primary Tax Base | Income, Profits, and Payrolls | Retail Consumption of New Goods/Services |
| Tax Rate (Inclusive) | Progressive (10% to 37% Income) | Flat 23% (Adjustable annually) |
| Tax Rate (Exclusive) | N/A (Calculated on internal rate basis) | 30% (Added at the point of sale) |
| Enforcement Agency | Internal Revenue Service (IRS) | State Sales Tax Authorities & Treasury Bureaus |
| Timing of Liability | At the time of earning or profit realization | At the time of final retail purchase |
| Savings & Investment | Taxed (Capital gains, dividends, interest) | Tax-exempt (Only spending is taxed) |
| Basic Needs Relief | Deductions, Exemptions, and Credits | Monthly Family Consumption Allowance exempting purchases up to the poverty level for each family. |
Elimination of the Corporate Income Tax
Businesses would no longer pay federal taxes on their net income, dividends, or payrolls.
This creates a massive incentive to repatriate offshore earnings, which are currently "parked" abroad to avoid the U.S. corporate income tax.
| Business Category | Impact of FairTax | Strategic Response |
| Retailers | High collection burden; receive 0.25% fee | Upgrade POS systems; audit sales reporting |
| B2B Service Providers | Non-taxable sales | Expansion of services; focus on business investment |
| Manufacturers | No tax on inputs or exports | Repatriate operations to U.S.; lower export prices |
| Small Businesses | Removal of payroll tax compliance | Increase hiring; simplify bookkeeping |
Small businesses would deal with the change by repurposing the administrative time currently spent on payroll withholdings and income tax filing toward operational growth. There is a 0.25% administrative fee provided to businesses for collecting and forwarding the FAIRtax.
Some of the people who profit from the present income/payroll tax system
The complexity and complications of the income/payroll system have created an entire industry of well-paying jobs that will be unnecessary when the FAIRtax is passed. These groups are solidly united in opposing any real reforms to the income/payroll tax system. Many of them actually realize that the FAIRtax would be better for the country, but still oppose it because it represents a financial threat to them and their family.
The Accounting/Income Tax Preparation and Legal Tax Planning Industry
With 150 million individual tax returns eliminated, tax professionals will have to deal with the change through a massive structural pivot toward Client Advisory Services (CAS)
These Client Advisory Services will include:
- Expansion of Outsourced CFO Roles: Small businesses still need sophisticated financial analysis, even if they no longer file income taxes CPA’s will have to transition into "business advisors" focusing on cash flow, revenue forecasting, and risk management—actually helping their client’s business do better.
- Audit and Compliance Oversight: Retailers would need internal controls to ensure their sales tax collections are accurate to avoid state penalties. Accounting firms would shift their audit departments to focus on these high-volume transactional reviews.
- Legal Professionals who specialize in tax planning: To survive, these individuals will need to either become advisors on how to protect assets and handle liabilities or switch to other areas of the law—business work or other specialties.
- Wealth Management and Estate Planning: While the estate tax might be gone, the "merit-based" management of multi-generational wealth would still require expert guidance.
The Underground Economy
The underground economy—people working for cash under the table or making their money by less than legal means—is largely untouched by the income tax system. Those people don’t file income tax returns, but they do buy things. The FAIRtax will "capture" the underground economy—estimated at a trillion dollars in lost revenue annually. Currently, participants in illicit trades (e.g., drug trafficking, unrecorded labor or just working for cash or taking payment partly in cash) can easily avoid income and payroll taxes.
Under the FAIRtax, these individuals would pay their federal tax burden at the point of consumption—when they buy a car, a meal, or a television.
Similarly, undocumented immigrants will pay the 30% sales tax without being eligible for the prebate (which requires a valid Social Security number).
This makes this demographic "net taxpayers" in every transaction, effectively broadening the tax base to include every resident and visitor within U.S. borders.
The Wealthy Who Rely on Borrowing
Many wealthy Americans do not sell assets to fund their consumption. They use very low interest loans. Under the FAIRtax, the very wealthy will pay the FAIRtax when they purchase their yachts and mansions.
Retailers Who Rely on Imports
Many retailers are concerned that the FAIRtax will dramatically affect their business if imports, that have largely escaped any federal taxation, are subject to the FAIRtax--a border-adjusted tax system. Exports are non-taxable, while imports are subject to the same 30% sales tax as domestic products
.
| Market Participant | Impact of Border Adjustment | Behavioral Response |
| U.S. Exporters | 10%-20% lower cost due to removed hidden taxes | Expand international market share |
| Foreign Manufacturers | Face 30% tax at U.S. retail level | Build manufacturing plants inside the U.S. |
| International Tourists | Pay 30% tax on all U.S. purchases | Tourism becomes a major federal revenue stream |
| U.S. Consumers | Imports become 30% more expensive | Focus on domestically produced goods |
CONCLUSION
The elimination of the federal income tax/payroll tax system with the FAIRtax represents the most significant socioeconomic restructuring in modern American history.
By taxing the outflow of money rather than the inflow, the FAIRtax ensures that the more an individual in the U.S. spends on new retail goods and services, the more they contribute to the nation’s revenue.
We should ask any who oppose the FAIRtax because it “displaces workers”, “Isn’t it true that these “displaced” workers can start providing services that don’t just push paper around but contribute to the productivity, profitability and success of our businesses?”
THE FAIRTAX IS THE ANSWER.
The FAIRtax, is a national retail sales tax on new retail goods and retail services which provides a family credit so that all purchases up to the poverty level for each family are not taxed. There is no withholding from your paycheck and YOU NEVER HAVE TO FILE A TAX RETURN TELLING THE GOVERNMENT HOW MUCH YOU EARNED AND HOW MUCH YOU SPENT, AND YOU’LL NEVER BE HARASSED BY THE IRS EVER AGAIN.
Many of you have labored tirelessly for freedom from the federal income tax and the IRS. You deserve a great deal of credit for your efforts to educate the American people on the need to fund the American government in a way that is good for America and returns freedom to the American people.
It is imperative, though, that we don’t replace the current income tax and the IRS with an alternative system that can still be manipulated by the Ruling Elite. We must let Congress and the President know that the best way to replace the income tax and the IRS is with the FAIRtax.
Make no mistake about it. The FAIRtax is a grave threat to the Ruling Elites. It will strip them of their power and their ability to control us though the tax system. Their opposition to the FAIRtax will be fierce and unrelenting. And don’t think for an instant that they won’t use half-truths, deception and downright lies in their desperate attempt to hang on to their power.
However, with the support of this President, we can finally eliminate the income tax and the IRS!!!
Of course, the best course of action is to not only repeal the income tax and abolish the IRS but to repeal the 16th Amendment as well so no future administration can ever shackle the American people with an income tax again.
We must come together and ensure that real tax reform, the FAIRtax, is not subverted by the Elites in D.C.
This will take the diligent efforts of all of us. We need your financial assistance, and we need your grass roots assistance.
If you have contacts that will allow us to get more information to President Trump about the FAIRtax please let us know.
Please email us at info@fairtax.org and we will give you some options on how you can best help us.
At a minimum, please call your Congressional representative and ask if he or she supports the FAIRtax. If so, thank him/her for their support and suggest they become a cosponsor of HR-25 if they’re not one already. If not, ask why not. If your representative claims to be unfamiliar with the FAIRtax, offer to have someone come to their office and explain it to them.
Please go to this link to invest in AFFT and help us pass the FAIRtax. It’s an investment in your and your family’s future.
THE SOLUTION—PASS THE FAIRTAX!
Why would D.C. pass the FAIRtax and give up this almost unlimited source of donations? The only way that they will is if the rest of us demand it!
Isn’t it time to end this ludicrous tax collection system and the IRS?
HELP BRING ABOUT REAL TAX REFORM AND STOP FUTURE IRS ABUSES
By contributing (investing) $10.40 per month, you help provide a financial base to AFFT. If you can make larger contributions (investments), these will be used not for salaries, as we are all volunteers, but for the needed updates to our economic studies which will be vital for all future years.
Please go to this link to invest in AFFT and help us pass the FAIRtax. It’s an investment in your and your family’s future.