Fair Tax - Do You Think It is Fair?

Hello! I have had some great suggestions and questions from a number of you. Today someone asked me about the "FairTax". I have to admit I knew very few of the details, but it sounds interesting.
http://en.wikipedia.org/wiki/FairTax

Essentially the FairTax abolishes Federal income tax and payroll tax. The only Federal tax that we are left with is a sales tax, proposed to be 23%. There seem to be lots of pros and cons.

Included in the pros are that this tax captures the entire US tax base from less wealthy to mega wealthy and from illegals to under reporters. There are vast numbers of anecdotes suggesting that a high percentage of able US workers either do not pay at all or under pay their taxes.

Opposition includes, similar to the Flat Tax, that the FairTax is a "regressive" tax because it taxes the lower and middle class at a greater percentage of their income than the wealthy. It is also said that the FairTax would not capture as much revenue as the current system.

The last point I think is reasonable. This suggests that Federal tax revenue in 2007 amounted to $2.6 trillion:
http://www.heritage.org/Research/features/budgetchartbook/fed-rev-spend-2008-boc-C1-Federal-Spending-Is-Growing.html
This suggests that consumption (granted, do not know the exact parameters of this definition) is about 60-65% of GDP:
http://www.bloggingstocks.com/2009/02/04/will-the-u-s-economys-focus-shift-from-consumption-to-producti/
This suggests that 2008 GDP amounted to $14.3 trillion:
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)
Therefore, if the US government taxed consumption (65% of GDP) at a 23% tax level, the revenue raised would equal $2.1 trillion, or half a trillion shy of 2007 levels.

It is true too that the FairTax seems to only tax end consumption and only "new" goods, so I presume it is not fair to include the full 65% of GDP. Nonetheless, it makes sense to me to look at plans like this. For one, it is glaringly more simple than the current tax code and the implementation difficulties that I could foresee are easily overcome. Don't forget, the current IRS budget is for approximately $11 billion annually. If a piece of that was offered to some private enterprise, I am sure it could come up with a way to solve the implementation glitches.

I understand that people will come down on the FairTax as regressive. But how can one argue that illegal immigrants and Joe the Plumber, who have either not reported taxes or significantly under reported taxes, should pay less that Joe the Garbage Collector or Jane the Software Engineer, who have dutifully paid tax through payroll their whole lives? Similarly, I do not really buy the argument that because wealthy people make more money, a greater percentage of it should be taxed. Plus, the FairTax is progressive in terms of consumption. The sales tax on a new Porsche is going to be a lot higher than a new Hyundai.

This does bring me to a a few questions. Does the FairTax stymie new product development? Isn't one incented to buy slightly used and use for longer? Whereas, that is arguably better for the planet in the long-run, it certainly would lower the government's income?

There seem to be many interesting angles and questions with regards to the FairTax, and I am curious to hear some other view points! Just because I did not get the math to work on my quick calculation, does not mean the tax is not a decent idea. After all, one can balance a budget through both the revenue and expense line items.

-2outof4