I have looked into it and I don't think it is viable... there are too many problems.

1. the middle class mostly spends more than they make.  We have a negative savings rate in this country.  At 30%, they would all lose out on the benefits of the graduated income tax, where the rate starts at only 10%.  Thus, most people who make between $30,000 and $200,000 would pay significantly higher taxes.  They wouldn't just pay tax on what they make, they would also pay tax on what they borrow and spend!
2. There would certainly have to be exceptions for major purchases like homes - can you imagine what a 30% tax would do the housing market?
3. Your crime analogy is flawed.... we would actually have more crime because those drug dealers you mention would diversify into stolen goods to be sold on the black market - with no taxes!  Just consider the bootleg cigarette market that sprung up after the cigarette tax was implemented.  And, what about all of the sales through E-bay and other online vendors - do you think they would charge a 30% tax?  Policing that would be just as burdensome as the current income tax - maybe more so.  Employers are much better at collecting income taxes than all of the vendors would be collecting sales tax.
4. What about all of the people who have invested in Roth IRAs? They have already paid the tax on their retirement savings - they would be taxed AGAIN when they draw it out and spend it.  How is that for rewarding those that have planned for their retirement?  There is a similar problem with those who have invested in tax free muni-bonds and the like.
5. The rich could still escape much of their tax burden by saving more - they are the only group that currently saves anything as it is.  And, if people save more, to cut their tax burden, the economy suffers.  As people spend less, the rate of the Fair Tax would be insufficient and it would have to go up - creating more of a burden on the middle class.  Those selling luxury items would be the hardest hit and many of the companies that make luxury goods would see sales decline and they would have to charge more for their products - making them even less appealing.  And, the middle class workers employed by these industries would suffer lob losses.  It would be a devastating cycle.
6. How would the government function during economic recessions when unemployment rises and people spend less?  The Fair Tax would be much more volatile and it would make creating a balanced budget even more difficult. 

The Fair Tax is an appealing gimmick, but it is not really well thought out.  If you tried to make the Fair Tax workable and really fair - it would be just as complicated as the current income tax and it would still require a huge bureaucracy to police.

Sorry... I'm not a fan of it and I don't think we will ever see it.  If we tried it, I think we would end up trying to phase it in along side the income tax and we would end up having both.  We would never really be able to escape the income tax completely and we would just end up with two complicated tax systems.

Best,
Robert A. Franco
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