I havent thought completely thought the fair tax stuff yet, but one thing seems obvious to me.
If retailers are forced to add 22% to the cost of all their goods, then wouldn't I just buy everything from the black market and save 22%? Wouldn't most people? And wouldn't it be about as enforcable as prohibition and the current drugs laws.
Where is my logic wrong?
That is a major problem with the sales tax. Experience around the world suggests that when rates get to the 12-15% range (well below the proposed "Fair Tax") there is massive evasion. The risk/reward of evading a large sales tax crosses the tipping point.
Your logic is wrong in that you are using the 22/23% rate, which is the 'inclusive rate'. Really, this sale tax bill will add on a 30% sales tax to the cost of the item. But other than that, you make a legitimate point.
wouldn't I just buy everything from the black market and save 22%?
How would you save 22%? The black market has to aquire their supplys to sell to you, they either pay the tax on that or take the risk of theft/embezzling/fraud etc. to give you a 22% lower price. I doubt that very much.
Remeber even someone operating on the black market has to have enough sales to make a living. The more customers ,the greater their visibility and risk of being caught through either informers or by direct observation by tax enforcement agents of the states.
You don't think government and legitimate businesses that are under audit and certification allowing them to purchase tax free are just going to sit by and let black markets take the retail market over do you?
Where is my logic wrong?
In thinking states don't enforce retail sales tax laws or fail to go after businesses and those who violate them, and in thinking you the customer are likely to see any benefit from buying black market to avoid a 22% tax. Guaranteed 22% is not enough to sustain a black market operation in face of the risks and costs associated with such businesses.