Tax evasion would be much much lower than it is right now.
The FairTax will not stop criminals, no tax reform will stop tax evasion.
Bu the FairTax is EXTREMELY efficient in curbing abuses in evasion. Here’s why:
1. It takes two people to commit tax evasion under the FairTax. It takes a minimum of one under the Income tax. That means it will be easy to set up sting operations posing as a buyer or seller to catch someone in the act of not paying the NRST on a purchase transaction of a new retail product or service.
2. More than 70% of all retail transactions are handled by a few thousand corporations and their retail outlets. These transactions are computerized with audit trails. No CFO or accounting firm is going to risk going to prison over evading the FairTax NRST when their company or client revenues are so difficult to hide. But under the Income tax there are myriad ways of hiding profit and by setting up shell subsidiaries to hide debt or profit. OFten two sets of books exist, one for shareholders and one for the Treasury Department.
And even in the event that some nefarious group of corporate executives attempts to hide several data batches of revenue transactions, a sting operation can be conducted by purchasing products over a time of investigation and seeing if they show up in audited records.
All of this is made possible because the enforcement focuses on spending, not profit.
3. Because most (70%+) of the government retail sales tax revenue is generated by a few thousand corporations and their retail outlets, that means government enforcement can focus on the other 30%- of sales tax revenue generation. That means criminals will feel much more heat than they do now.
4. Most Americans are law abiding. They will not want to risk prison because they were trying to buy new products and services without paying the NRST. When they start to see news stories of government sting operations, law-abiding Americans will absolutely refuse to go along with NRST tax evaion. So tax evasion is NOT going to be higher, it will be lower because there wil be more agents available to monitor and prosecute tax evaders who now fall under the radar of tax enforcement.
Now you say that giving a person or kid $10 to wash a car, that it will require a tax to be paid. Yes that’s true, no different than it is now. Except that the person or kid will have to report the income and pay both sides of Social Security, as well as calculate tax on profit.
Perhaps the only downside of your example is that the person or kid doing the carwash for $10 will be easier to catch if they evade the NRST.