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The NIPA personal expenditures numbers (the base for the FairTax) factor in current sales tax evasion/avoidance. The income numbers (the base for the current system) have the current income/payroll tax evasion/avoidance.

Show us where income from sales from illegal trade, evasion activities, underground cash economy are accounted for in the NIPA data. No such activity is reported to be included or even estimated in the NIPA data.

Here's a link to a paper describing what is measured as the value of final goods and services sold in the NIPA GDP and GNP data sets and what is expessly not included (e.g. illegal trade, cash underground, any non-reporting activities, non-production activites.)

http://spruce.flint.umich.edu/~mjperry/Unit10.html

WHAT COUNTS IN GDP?:

1. Only FINAL goods and services purchased by final users. Only retail sales count, not intermediate (wholesale) goods or transactions. When GM buys steel, tires or transmissions, those transactions don't count because it would be double counting since those expenditures will be accounted for in the final retail price of the car. For example, suppose GM spends $15,000 for a car and sells it to a dealer for $16,000 and the dealer sells it for $17,000. We only count the $17,000 for the final retail sale. We can't count $15,000 + 16,000 + 17,000 = $48,000. Only the value of the final output is counted, and the value of the inputs are not directly counted since their value is reflected in the final purchase price.

See Example, page 158. Bread example.

2. Only goods and services produced during the time period are counted. Only new production is counted, not secondhand sales. Example: sales of used cars and used houses don't count. They were already counted as new production in the year built. Resale doesn't get counted in current GDP. Commissions on used cars or houses would get counted, because they are current services.

3. Financial transactions and income transfers are excluded. Example: stock or bond purchase is just a transfer of money from one individual to another, it does not involve current production of a good or service. Commissions would count, as a current service (income) provided by the broker. Gifts and income transfers (Social Security, welfare, veterans' pmts, etc.) also don't count, since no current production of goods or services is involved.

4. ONLY Domestic Production is Counted, regardless of who provided the labor. Foreign citizens working in the U.S. count toward U.S. GDP, since their labor contributed to "domestic production." U.S. citizens working temporarily overseas does NOT count in U.S. GDP, since their labor does not contribute to "domestic production."

GDP vs. GNP - GDP measures domestic production within the 50 states, regardless of who provided the labor or capital, US citizens or foreigners. GNP measures the production of US "nationals," U.S. citizens regardless of where they are working.

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PROBLEMS WITH GDP -

1. Nonmarket production - Nonmarket production is excluded from GDP because there is no way to accurately measure it. Only actual "market transactions" get counted in GDP. Nonmarket production includes household production like fixing your own car, repairing, fixing, painting your house, working on your garden, growing your own food, cooking, the work of a housewife/househusband, etc. Estimated to be 10-15% of GDP, or about $1T/year.

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2. Underground economy - could also easily be another $1T, or 10-15% of GDP from prostitution, drug trafficking, gambling, smuggling, illegal gun sales, tax evasion, etc. Also unreported cash income from cash business - taxi drivers, waiters/waitresses, bars, craftspeople, carnivals, fleas markets, illegal immigrants, etc.

Here's a hyper link to the NIPA user guide describing the tables and how data is collected and entered.

PDF: NIPA User Guide

Show us where any illegal income, evasion activity or cash economy activites or income are estimated and incorporated into the NIPA data series.

Here is a hyperlink to the NIPA keyword index of what is included and where in the tables each item can be found:

http://www.bea.doc.gov/bea/dn/nipaweb/NIPATableIndex.asp

Show us any data entry what ever providing an estimate of underground cash economy, illegal trade or any trade or income associated with tax evasion which by its very nature is unreported and no accurate way to measure it thus included or in anyway estimated in the NIPA series.