 As defined in the proposed legislation , the tax rate is 23 % for the first year . This percentage is based on the total amount paid including the tax ( $ 23 out of every $ 100 spent in total ) . This would be equivalent to a 30 % traditional U.S. sales tax ( $ 23 on top of every $ 77 spent — $ 100 total ) . The rate would automatically adjust 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 effectively tax wealth , increase purchasing power and decrease tax burdens by broadening the tax base . 
