When the Executive pays the illegal gardener under the table, he pays him from fully taxed income.
Under the FairTax, the executive's UNTAXED income will pay the illegal gardener (and no, he won't pay any FairTax on that transaction.) If the gardner then sends 20% of his income to Mexico, that 20% forever escapes taxation. Of the rest, the illegal is UNLIKELY to spend all of it on taxable items ... there is a thriving underground already for all sorts of goods and that won't change.
To the extent that the illegal's costs are increased by price increases from the FairTax, he will be incentivized to go underground for what used to be mainstream purchases.
All of the illegal's mainstream purchases are ALREADY in the legitimate economy today, and as such are already included in the FairTax tax base; all of his underground purchases are STILL NOT in the FairTax tax base ... they're still underground. So, no previously illegal activity is captured under the FairTax. All that happens is that the point of taxation shifts.
If ANY of the currently mainstream consumption activity goes underground, the FairTax is in revenue trouble. The likelihood of that happening rises dramatically as the tax rate increases ... a fact which FairTax supports ignore.
Under the FairTax, the executive's UNTAXED income will pay the illegal gardener (and no, he won't pay any FairTax on that transaction.)
I have no quarrel with that as far as it goes but we are not talking only of the executive's income.
What of the income of that illegal worker under the current system?
Does HE pay ANY income or payroll taxes?
Would he pay the sales tax on his legitimate purchases under the Fairtax?
What about the local dope dealer who derives his entire income from selling his illegal products down on the corner? What about the prostitute who derives all of her income from plying her trade in that same neighborhood? Do those folks currently pay ANY income or income or payroll taxes?
Would they pay at least SOME tax under the fairtax?