[Dimples]

So then you'd agree that there exist certain untaxed consumption transactions under the FairTax scheme (a different underground, if you will.) Presuming you're right and the nanny DOESN'T raise her prices and act as an "in the game" tax collector, the flow of money from above ground employer to homeowner to underground nanny to above ground retailer only taxes each dollar once: at the above ground retailer.

In the current scheme, the same flow only taxes the money once: at the employer through withholding.

While the FairTax does collect tax from different entities at different points, and some tax from money that escaped taxation in the prior current scheme, other monies, now taxed, escape. It is certainly not clear that the the tax base is significantly larger, but it is different.

[ovrtaxt]

In the current scheme, the same flow only taxes the money once: at the employer through withholding.

In this particular example, yes. But every item or service is going to see a variable effect, depending on what happens to it before it's consumed. Items with many stages of production, such as computers or cars, will realize a greater price drop, while pure services such as the nanny will not. There are estimated effects for different industries on the FairTax site.