[groanup]

I don't recall any who support the FairTax as claiming that the prebate (or anything else) would be without fraud. Whenever you have people, you have the potential for fraud. I personally think the opportunity for fraud is fairly low however.

The vast majority of transactions under the NRST would require the collusion of two people to effect a fraud while the current system let's you cheat alone. The fraud losses under a NRST probably would not approach the gains from the taxing of the underground cash economy. In fact, if you assume fraud losses under the NRST would stay about the same (I think they will decrease) the additional underground tax base would be a huge net increase in revenue. Add in a few tens of millions of foreign tourists and...well?

[Your Nightmare]

The vast majority of transactions under the NRST would require the collusion of two people to effect a fraud while the current system let's you cheat alone.

That's just not true. The tax on every transaction under a NRST could be evaded by just one person. The retail collects the tax and doesn't remit it.

The fraud losses under a NRST probably would not approach the gains from the taxing of the underground cash economy.

The "underground cash economy" isn't tax any more under a NRST than the current system.

Add in a few tens of millions of foreign tourists and...well?

And subtract a few million Americans visiting foreign countries and ... well?