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"I would think this plan would make the people not paying anything now contributors and thus lower my taxes. Am I wrong here?"

I thought so too. The drug dealer who doesn't pay any income taxes today would have to pay the Fair Tax when he buys his Lincoln Continental.

But it was pointed out to me that the Lincoln Continental today contains about 22-23% in hidden taxes that are included in the selling price. These hidden taxes consist of employee payroll taxes (FICA) and federal income taxes of the people who assembled the car, employee payroll taxes and federal income taxes of the people who built the things that go into the car (tires, seats, winshield, etc.), the corporate income taxes of all the companies who employ these people, etc.

Under the Fair Tax, all these taxes are no longer paid by the employees and emloyers. They are replaced by the more visible Fair Tax, and is basically a break-even.

The only way to get more money from the drug dealer is if he charges the Fair Tax on the illegal drugs he sells and sends that money to the federal government. Highly unlikely.

Whoever "pointed that out" to you needs to have his pointer examined since for a year or more now there has been no such number used for embedded tax. The figure used presently (which the naysayers stipulated to) is 9%, not 22-23%. And the hidden taxes do not include FICA or employee wages covered by the income tax - those are just a normal part of the item cost passed on by the merchant.

Let's say the illegal economy guy buys a "$100 baseball bat". To the seller that means a $15 profit let's say and of that the merchant would pay $15 x 0.25 = $3.75 in income taxes. That much is certainly borne by the buyer - the guy in the illegal economy. Beyond that, the only tax paid would be on things such as the employer's portion of FICA, compliance costs, opportunity costs, etc. These would amount to a 9% price increase which would be $7.65 and of this only ($7.65 x 0.15) x 0.25 = $0.29 would represent hidden tax paid by the buyer; altogether a total of just over $4 for all taxes "contributed" by the illegal economy under the income tax. Under the FairTax, the amount would be the full $23. That's a major difference.

It's worth noting that even if the hidden tax amount were 23%, the total amount involved would be $4.48 for all income taxes - still greatly less that the $23 under the FairTax.