Rejecting all the tricks of FairTax supporters and calculating the tax rate honestly--by including the higher spending that it mandates and by being realistic about what could actually be taxed--professional revenue estimators have always concluded that a national retail sales tax would have to be much, much higher than 23%.
A 2000 estimate by Congress's Joint Committee on Taxation found the tax-inclusive rate would have to be 36% and the tax-exclusive rate would be 57%. In 2005, the U.S. Treasury Department calculated that a tax-exclusive rate of 34% would be needed just to replace the income tax, leaving the payroll tax in place. But if evasion were high then the rate might have to rise to 49%. If the FairTax were only able to cover the limited sales tax base of a typical state, then a rate of 64% would be required (89% with high evasion).

I've emphasized problems with the FairTax rate because public opinion polls have long shown that support for flat-rate tax reforms is extremely sensitive to the proposed rate, with support dropping off sharply at a rate higher than 23%. But there are also massive technical and administrative problems with collecting all federal taxes at the checkout counter and relying entirely on state governments to collect the federal government's revenue.

Among the problems: What possible incentive would the states have to be vigorous in their federal tax collections? What is to stop them from slacking off and giving their citizens a tax cut at federal expense? What about states with no sales taxes? What's to stop people from bypassing retail outlets and buying their goods from producers or at wholesale, tax-free?

Perhaps the biggest deception in the FairTax, however, is its promise to relieve individuals from having to file income tax returns, keep extensive financial records and potentially suffer audits. Judging by the emphasis FairTax supporters place on the idea of making April 15 just another day, this seems to be a major selling point for their proposal.

Refunds would be done by direct deposit, unless the person does not have a bank account, then it would be sent by mail…just like any other benefit check/ refund.Gee, if we presumed high evasion, we should all be in the 89% Income Tax bracket!  After all, it is assumed that hardly anyone would pay it.

One can cite any number you wish, but the important thing is that once it is established, unlike income tax rates, whose fluctuations we hardly notice except on payday, or, more significantly, on April 15th, people watch sale taxes like hawks.  Around here, if some school district wants a penny tax added to pay for some new schools, people are up in arms, and all kinds of hearings have to given to quell the populace.  Likewise, I think Congress would have to think twice about going too often to the well to finance unnecessary programs and projects.

If a state already collects sales tax, I am not sure of their incentive to slack off and not give the Feds their due.  I think this is referred to a “Honor among thieves.”  As for states with no sales tax, I am not sure what “Plan B” would be.  Perhaps the IRS will still have to collect taxes directly from merchants, just as they have done for payroll taxes.  May be it will be contracted out.  I don’t know.

  What is the incentive for a producer or wholesaler paying the sales tax on "lost" inventory out of pocket because they can’t prove they weren’t the end user?

The “deception” cited was that many states will still have income taxes, some of which may be as convoluted as the Fed’s.

The answer is that perhaps voters will like the idea of eliminating this annual headache completely, and force their state to consider other methods of revenue enhancement, such as the sales tax.

I am not a big fan of “Fair Tax,” but I like red herrings even less.

Filing on April 15th is not a headache.  It doesn't take much effort.  All one has to do is keep good records throughout the year and when it comes to April 15th, it's a snap entering the information on the required forms.  I've never understood where the headache comes from.  My guess is that it comes from not being organized.

“Only the little people pay taxes,” - Imelda Marcos