 A household 's effective tax rate on consumption would vary with the annual expenditures on taxable items and the fixed monthly tax rebate . The rebate would have the greatest effect at low spending levels , where they could lower a household 's effective rate to zero or below . The lowest effective tax rate under the FairTax could be negative due to the rebate for households with annual spending amounts below poverty level spending for a specified household size . At higher spending levels , the rebate has less impact , and a household 's effective tax rate would approach 23 % of total spending . A person spending at the poverty level would have an effective tax rate of 0 % , whereas someone spending at four times the poverty level would have an effective tax rate of 17 @.@ 2 % . Buying or otherwise receiving items and services not subject to federal taxation ( such as a used home or car ) can contribute towards a lower effective tax rate . The total amount of spending and the proportion of spending allocated to taxable items would determine a household 's effective tax rate on consumption . If a rate is calculated on income , instead of the tax base , the percentage could exceed the statutory tax rate in a given year . 
