There is hardly an area of American life more subject to partisan debate than the tax code. Democrats want to raise taxes. Republicans want to slash them. At least that's how the well-worn narrative goes. But in actuality, debate over the Internal Revenue Service and how much Americans should fork over to Uncle Sam can be more complicated.

Not all lawmakers of a certain caucus align. Take the FairTax Act of 2023, for example, proposed in January 2023. The bill is championed by some GOP House members, but not all. The idea for the legislation – a universally applied sales tax on consumer goods and services – has been around for a long time.

Here's everything you need to know about the proposed bill and how it would work.

What is the FairTax Act of 2023?

The FairTax Act of 2023, a bill introduced in January 2023 by Rep. Earl “Buddy” Carter, R-Ga., , proposes a national sales tax on the use or consumption of taxable property or services. The sales tax would be levied in place of current income taxes, payroll taxes, and estate or gift taxes in the Internal Revenue Code of 1986.

The proposed legislation would repeal those taxes and instead enact a new Internal Revenue Code: The Internal Revenue Code of 2023. 

Though the bill outlines a 23% tax rate, the "gross payment," or the payment for both taxable property and services, combined with federal taxes is actually closer to 30%.

The bill, a brainchild of one faction of the Republican Party, still does not have broad GOP support as of early 2024 and is unlikely to pass. It would need to not only make it through the House but also the Senate, which has a Democratic majority. President Joe Biden has already said he would veto the bill should it defy odds and reach his desk.

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How does FairTax work?

Enacting the FairTax Act would usher in a complete overhaul of the tax system.

The sales tax levied would effectively replace both payroll and income taxes. The proposed rate is 23% for 2025, to be adjusted in subsequent years. It would fall to the states to administer, collect and remit the sales tax to the Treasury.

Certain property and services would be exempt from the tax:

• Used and intangible property.

• Property or services purchased for business, export or investment purposes.

• Property or services purchased for state government functions.

The would be allocated to five categories: the general revenue, the old-age and survivors insurance trust fund, the disability insurance trust fund, the hospital insurance trust fund, and finally the federal supplementary medical insurance trust fund.