Final-Fan:

"Rather, a FairTax proposal like the initial income tax proposals would, say, call for replacing 10% of the income tax with a national sales tax of whatever size would make it revenue-neutral, and call for another shift of, say, 15% every five years if an economic review board gave the thumbs-up each time. We would be entirely converted in 35 years. Not only would this guard against the plan being disastrous in and of itself, it would help people and businesses both adjust to the new system. The current "all-in-one" proposal is a leap of faith into the unknown which is unmatched in the history of taxation in the United States and possibly in modern history."

That's probably something like how the FairTax would end up being implemented anyway.

I really shouldn't take this bait, but I can't help it. It isn't only the right wing of the country that is promoting the FairTax. Democrats like Mike Gravel are also promoting it. It might be true that more Republicans support it, but that is for different reasons such as the power transfer from government to the people. 

(1) If you mean that you would not have to pay the FairTax on the extra 10, I am going to assume that you would sell these extra 10 outside normal POS, say with cash. If this is the case, not much we can do about it. Why is/isn't this happening now at the rate of what you expect it to be under the FairTax?

(2) All items sold at POS within US borders, no matter where the items originated from, will have the FairTax placed on it. I say that because it sounds like you are saying that overseas items bought by private individuals or businesses will not have the FairTax attached to them. If a business buys something to resell, they will not pay the FairTax as we have discussed. Their product will be taxed @ POS. If an individual buys product online or by phone or by mail the FairTax would be collected when it was imported and went through Customs.

(3) Even IF evasion is rampant under the FairTax, the only thing that means is that the Federal Government will not be able to spend that money. What is wrong with smaller Federal  Discretionary Spending? I am all for smaller government, though the cost of breaking the law to do so is not exactly what I have in mind for that.

This probably won't answer your questions, but maybe we can get to a more definate question with a more definate answer. 

I won't take that bait. Interesting to hear about Mike Gravel, though.

"Why is/isn't this happening now at the rate of what you expect it to be under the FairTax?"

Perhaps because the current sales tax is a mere fraction of the FairTax?

 Amen! Payroll taxes are terrible and as we have seen do show up in prices already. I think they should go today, even without the FairTax. 

In fact I believe that all corporate taxes (corporate income, payroll [including benefit taxes, FICA matching, Medicare, unemployment taxes, etc.], capital taxes, etc.) should be abolished today. Not to mention the Capital Gains tax... ugh I get with that tax even though I only made $40 in CG last year...

I will agree with that. I was asking the question to get this type of answer. However if prices decrease so much as that the FairTax will keep them at the current levels, people will not notice much, if any, difference in their budgets. Since this size of a sales tax has never been tried before at a national level, we do not know the effective evasion rate, whether good, bad, or indifferent. An underground economy could pop up, but I don't know how many people would want to deal with it. Perhaps everyone will, perhaps not many will, I don't know. I can find the research that American's For Fair Taxation did and come up with an answer, and I will post that too, but we simply do not know how the economy will respond. I predict it will respond favorably though.

1. See my posts above regarding the VAT in Europe. It's not nearly as big as the FairTax would be, but it's the best example I know of of large sales tax implementation.  And keep in mind that, again, VATs are to the best of my knowledge more tax-evasion-resistant than a retail sales tax.

2. I think you're thinking that people will be choosing, "hmm... do I go and buy it legally or do I go and buy the tax-evading product?" I'm sure that will happen, but there is also the issue of businesses doing it to pocket the difference and the customer never knowing anything was different (or maybe just thinking he got a really good deal).

Alright I have come across someone who has answered these questions, excellently if I may add. Here are the sources. http://www.fairtaxblog.com/20050828/evasion-potential-with-the-fairtax-vs-the-vat-tax/ and http://www.fairtaxblog.com/20050824/evasion-potential-of-the-fairtax/.

Both are articles and responses to a FairTax critic. He makes completely valid and rational arguments. He says that the VAT is not any more enforceable than the FairTax is. The FairTax requires all businesses to file sales to the "Sales Tax Authority" just as the VAT does. When conducting a Business to Business transaction, the selling business would need to have the buyer's tax exemption form on file, and if they do not have it on file, they would be required to tax them. The buyer would then claim a refund with the "STA."

Any experience with history of a NST lacks the current technology and tracking ability we currently have. Software that we have or can have is or will be extremely robust in ability to track statistics and patterns. If businesses start to claim unusual damaged or stolen goods numbers from the normal industry, we can flag them to be checked. The software could have extra routines that can be run to check for collusion between two businesses or between a business and an individual. If online poker sites can check for things like this, then why can't the "STA"?

His two articles answer a nagging question that I haven't been able to answer. Read them for yourself. The two above paragraphs are a very brief synopsys of the answer to this evasion question.