And in every other example you can think of. You're mixing apples and ringshank nails. The Income Tax taxes income; the FairTax taxes consumption ... regardless of what industry, price, or other factors.
Anyway, what does price drop have to do with whether the dollars escape the tax authority? My response that you quoted addresses the claim that under the FairTax, the underground economy is supposed to grow the tax base thereby reducing the effective tax rate.
I will stipulate that yes, different aspects of the economy will be affected in different ways. More correctly, goods and services with high LABOR content will have the potential for the greatest price impacts since wage taxes and payroll taxes make up the lions share of tax collected under the current scheme.
But again, what does that have to do with whether there FairTax can eliminate the underground economy?
Here is my thoughts from a different thread re the Underground Economy:
Of course the illegal economy contribution is already included in the revenue neutral calulations, pigdog, you REALLY don't understand this plan very well considering how long you have been harping on it.
The Revenue Neutral calculations basically added up all the retail sales and services that would be taxable under the NRST, and divide them into the amount of government income that needs to be generated to replace the income and payroll and corporate taxes that would be lost. That yields the required FairTax rate to generate the same ("neutral") income.
The way they propose to start taxing the illegal underground economy is to start applying the taxes to the legal transactions that the drug dealers are making right NOW. Since they can't nail them at the income tax level they think it will be easier to nail people who are not reporting retail sales because it requires collusion between the illegal drug dealer and the honest retailers.
They do not expect to make what is now an illegal transaction, become suddenly legal by adding an additional 30% FairTax to the transaction.
ancient_geezer do you agree with this statement above?
In fact, once the wage and price issues are squared away, my biggest remaining concern with the FairTax is that the 30% tax rate will drive many retail transactions underground because of the very high tax rate, that is the big unknown. I am esp worried about this as it relates to personal services- which are transacted individual-to-individual.