Okay, I want into this fray. I agree with you - this fair tax is indeed very good. I've been yelling about it for over a year now. The current system is not fair; it only taxes those of us who are "honest" or W2/1099 holders. Why should the underground economy be exempt?
This is another piece of misinformation originating from the sales tax advocates. A sales tax cannot capture illegal transactions like a drug sale. The drug dealer is not going to collect and remit a sales tax.
But what about when the drug dealer buys a loaf of bread? Well, that is not the underground economy. That is the legitimate economy. The bread transaction will be captured by a sales tax, VAT or flat income tax.