Uncollected Revenues

Critics of FairTax often cite the their concern as stemming from the difficulty they perceive with collecting the tax. Basically, they fear that the system is easy to cheat. I'm in a store, I want to buy something for $100. I tell the store owner something like, "you know, I don't have $100 but I do want to buy your item. I do have $70. Why don't I buy it for $70 and you don't charge me tax on the item?"

Cheating the system is definitely a fair point of discussion. And the above scenario not only can happen but inevitably will happen. But let's face it: there are problems with the income tax system as it exists today. A report out today says income taxes in 2001 cost the government (you and me) $345 billion in lost revenues. $345 billion! Apparently it's not that difficult to cheat the current system.

The question is not is either system foolproof. The question is, which system will result in less cheating? One big difference between the current system and FairTax is that today I can fill out an incorrect earned income (whether by accident or on purpose) and send it away. Until it's evaluated by the government, there is no other check. With FairTax, someone has to be willing to cheat with you. I can't buy something without paying taxes if the store is not willing to sell it to me without charging taxes. By the same token, the store can't easily charge me taxes without me realizing that I'm not being charged taxes.

Certainly these scenarios will occur. I just don't think it'll be very common. Under FairTax, two people have to be involved in order to cheat a system. Under the current system, only one. It sounds much more likely that a store would rightfully charge someone tax and then keep the tax for themself and not pay it to the government. But that's possible under the current system. Once again, I think the advantage goes to FairTax over the current system.

The good news (other than FairTax is coming :)) is that the government does hope to collect an additional $55 billion or so of that unpaid debt. I wonder how much those attorney and collection fees will cut into that.