Gotcha. So today, Joe Drug dealer is profiting about $50,000 a month from selling coke and paying zero taxes. And Joe Drug dealer, having money and enjoying the good life just bought himself a big $100,000 Benz, then put on $20,000 aftermarket spinners. Wears $200 sneakers. Enjoys buying expensive jewelery for himself and his "lady friends". And he has paid ZERO in taxes.
However, if the FairTax is in place, he would have paid taxes on the Benz, spinners, sneakers, jewelry, etc...
And he still has to a place to live, food to eat, clothes to wear, will purchase entertainment items, gifts, luxuries, etc... But as you say, the FairTax won't get the black market money.
Rather colorful strawman though...
He pays the 23% embedded taxes on his legal purchases. He avoids income taxes on illegal sales. However, if the FairTax is in place, he would have paid taxes on the Benz, spinners, sneakers, jewelry, etc...
Exactly as it is today. In neither case does the drug dealer actually submit any tax. The only difference is under the fairtax he receives a little piece of paper showing what taxes that were paid on his purchase. On the income tax they are hidden and embedded into the price.