 During the first year of implementation , the FairTax legislation would apply a 23 % federal retail sales tax on the total transaction value of a purchase ; in other words , consumers pay to the government 23 cents of every dollar spent in total ( sometimes called tax @-@ inclusive , and presented this way to provide a direct comparison with individual income and employment taxes which reduce a person 's available money before they can make purchases ) . The equivalent assessed tax rate is 30 % if the FairTax is applied to the pre @-@ tax price of a good like traditional U.S. state sales taxes ( sometimes called tax @-@ exclusive ; this rate is not directly comparable with existing income and employment taxes ) . After the first year of implementation , this tax rate would be automatically adjusted annually using a formula specified in the legislation that reflects actual federal receipts in the previous fiscal year . 
