With the Fair Tax, your hated recreational and black-market prescription drug dealers would have to pay their fair share of taxes.
What gives?
Well, let's see - there is no income tax so the durg dealer's customer isn't paying tax on his income (nor does the dealer owe tax on his income). Will the dealer charge his customer the sales tax an forward it to the government? Not likely. so how does this fair share of taxes get paid?
They're paying taxes today on everything they buy.
Let's make it real simple. Drug dealers have lawyers, right? Let's say the lawyer is self-employed. He charges the drug dealer $100 per hour. The drug dealer pays him $100 per hour.
Now, the lawyer pays income taxes and FICA, right? That comes out of the $100. The lawyer keeps $70 and send $30 to the federal government, right?
Where did that $30 come from? The drug dealer! The drug dealer is really the one paying the federal tax! If the lawyer didn't pay taxes, he would only charge $70 per hour, right? And this goes for everything the drug dealer buys -- cars, houses, furs, diamonds -- everything contains these hidden taxes, just like with the lawyer.
Now, perhaps you mean the drug dealer is not paying any income tax. That's true, he isn't. But what if we could wave a magic and and force all drug dealers to file a 1040 and pay income tax? Do you think they'll take the money out of their profits? Are you kidding? They'll simply charge more for drugs so that, after taxes, they'll have the same amount as before.
Meaning who is really paying the tax? Correct! The drug user, not the drug dealer. You were paying attention! Good for you. A gold star for elksfersuper.