Goal: Tax the Underground Economy
All forms of income tax require that employers report the salaries that they pay their employees and contractors and that employees report all of their income. But the underground economy (drug dealers, thieves, prostitutes, illegal aliens and more) don’t report their illicit income and neither do those who pay them. For this reason, no form of income tax can ever collect from the underground economy.
By contrast, a retail sales tax can’t be avoided. Whether it’s utility bills, limousines, pluming repair, or airplanes, when a new product is purchased or a service is used, the tax is paid.
Since 9-9-9 is one-third sales tax, it nominally taxes the underground economy. But the income tax portions are still easily avoidable.
The FairTax, being a pure retail sales tax, cannot be avoided by the underground economy. Everything from the pimp’s Rolex, to the hit man’s ammo, to the meth lab’s electric bill, to the illegal alien’s lawn mower, to the mob boss’ multi-million dollar yacht is taxed at the same rate that everyone else pays. There is no place for them to hide. When they spend money on a service or a new retail product, they pay tax.
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