If everyone were forced to live under all of the current set of laws, taxes, and regulations then there would be a greater groundswell for less government.
However, so many people are able to sneak around in the gray market that the current system persists.
Where I live it used to be that everyone with a commercial van would plaster it with ads and phone numbers in order to solicit business as they drove around town. Now most of the vans are plain white with no markings. And I'm sure those that drive them will only take cash when they fix someone's plumbing or electricity.
People are living off the grid and are being forced to work and live in the gray market as a direct result of more and more oppressive and intrusive government regulations.
Where I used to live - I could not even have a garage sale without a city permit. I could not even have a plumber replace a hot water heater without a permit. So yeah. Some guy in a plain white van replaced the water heater.
Some guy who was likely an illegal and was also living just fine - off the grid.
Off-the-grid living would become less attractive with the change to a Fair Tax system. Off the grid means no prebate, yet you still pay the sales tax on your purchases.