OK Final, I think I have your answer about both Tax Evasion rates and the revenue-neutral status of the FairTax.

First lets start with the Tax Evasion question. This is a lenghty report called "The FairTax reduces complexity, compliance costs, and noncompliance" http://www.fairtax.org/site/DocServer/TheFairTaxReducesComplexityComplianceCostsAndNoncomplian.pdf

Yes, this document is from FairTax.org but it is accurate in its portrayal of current noncompliance with the current income tax structure. You can take or leave its proposal of FairTax compliance, but it does raise one very interesting point: the number of tax filers under the FairTax would reduce by 80%. Thus you would only need a small portion of "watch-dog" agents to verify tax compliance.

Another note from that document is the total tax compliance costs of the current tax code. I know I have said this before, but it bears saying again. America, as a whole,  spends 6 billion hours and $265 billion in the costs to just comply with the current tax system. That is the equivalent of a 22.2% surcharge on the amount of income taxes collected! For another comparison the $265 billion is costs to comply is roughly the same amount as America has given in charitible donations... that is messed up. (for source see previous posts)  Another document discussing only the compliance costs of current vs. FairTax is this: http://www.fairtax.org/PDF/WhatTheFederalTaxSystemIsCostingYou.pdf

Again even if you take their assertions with a grain of salt, you have to recognize that our current system is broken. Also note that the cost of collecting a retail sales tax currently costs businesses between 2%-3.8% of either the taxes collected, or the business' revenue (it wasn't very clear on that point). The point still holds that collecting sales tax is much less overhead than the current tax system.
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Now for the next topic, the revenue neutral claim of the FairTax. This document is posted on the FairTax.org website but is not calculated by them. The economists that have calculated this are very well respected and would have no reason to distort the truth (as some people might/could come to think). http://www.fairtax.org/PDF/Tax%20Notes%20article%20on%20FT%20rate.pdf

This document goes through the FairTax proposal and looks at the revenue of both the current tax code and the FairTax. It is extremely long and has lots of mathematical explanation of the FairTax and current tax code. It is not impossible to read through and understand (I am a testiment to that), you have to know basic algebra and have a strong mathematical fortitude to wade through all the different equations. In the end they calculate that the rate of the FairTax would need to be 23.82% to meet the estimates of FY 2007 current tax revenue. However that is assuming that the FairTax will not be a boon to the economy as they believe it could be. In which case if the FairTax increased the taxbase by about 3% the 23% would still be perfectly revenue neutral.

That would actually be way too much in taxes.  As it is now, people recoup some of the taxes paid every year in tax returns.  The IRS mails you a check for the amount you overpaid (and is a huge chunk of the Treasury's mandatory funding... it's some 200 billion a year if I read it right.)  This is probably the easiest way to see if you will be paying more in taxes.  Take your tax bracket percentage, figure out how much you get back, subtract that from taxes paid and you determine how much in general tax you paid.  Compare that to an estimate of how much in taxes you would pay throughout the year in a sales tax of 23% and you have your answer.

Wow, for some reason I hadn't though of that either...thats actually really nice...obviously not a reason on its own but still....

You raise a valid point. One that I do not have a concrete answer for. But let me ask you this, under current law tax evasion is about 15%, I believe. What constitutes tax evasion under current law? There are several ways to do it, namely misrepresenting your income on your 1040. There are also many other ways to cheat this income tax system. But for the sake of simplicity lets say that tax evasion = misrepresenting your income on your 1040.

How can you fraud the FairTax? I mean you as an individual. I understand how a company that collects the FairTax could evade it, but the reason why they would want to isn't as clear to me. To evade it, they could simply misrepresent their sales figures and pocket some of the extra tax as free income. But this could easily be sniffed out with some simple fact checking, similar to what businesses have to go through today.

Now how would an individual cheat the FairTax? They could create a fake business and claim everything as a business expense. They could try to buy things from the wholesaler whose sales have [edit] no FairTax attached. They could try to get some sort of exemption at the POS (note: I do not know if non-profit companies will also pay the FairTax, but I seem to remember that there are no exemptions to it. That is what the Prebate is for.).

In any case these things require that you either have a business front (legitimate or otherwise) to purchase from the wholesaler/supplier, or that you have some sort of tax exempt status (again I don't know if there would be said status). Is there anything else you can think of? If you can I will gladly add it to the list.

Now since 80% of the FairTax would be collected by 20% of the businesses, you can bet those businesses in the 20% (Wal-Mart, Target... etc.) will not life a finger to help you around the FairTax, as they would be watched hawkishly. So the question remains, what will be the evasion rate of the FairTax? I don't know, but probably less than the 20% of the remaining FairTax to be collected.

I say less than 20% because in order to buy from a vendor tax-free (as all qualified business will be able to) you must have the proper permits. You might need to keep those permits handy to show for transactions with your vendors. Also each business that collects the FairTax, or is hs one of these permits, must file monthly/quarterly (depending on your sales volume) statements with your state declaring how much business you did and how much FairTax you collected.

Since each business that collects the FairTax gets 0.25% of the collected amount, known as the Administrative Credit, they would have little problem declaring the full amount collected, as that would be covering the costs of collecting the FairTax (it would also be easy free money). Now each business sends the FairTax less 0.25% (or 99.75%) to the State for proper accounting. This process of sending the sales tax to the state is already done and would not be too much extra hassle. The States would collect all FairTax revenue from all businesses within its borders and take another 0.25% Administrative Credit from the FairTax collected. So the States each get an added bonus from this and would not mind an increase in revenue either. The Federal Government would then receive the FairTax minus the two Administrative Credits removed. (this is a very minor side detail but of the total FairTax collected the Feds would get 99.500625%. (FairTax - AC[1]) - AC[2])

Anyways, that is my reasoning to say that the FairTax will be easier to comply with, and easier to catch the cheaters. Both of those would mean tax evasion would go down. I say all of this with confidence because retail prices will remain very close to current prices, and may decrease in the long run. If, however, prices were to increase dramatically, I would agree with you that there would be much attempting to get around the FairTax.