If you want to see what the Fair Tax would be like, you have to look no further than the disaster that was the Luxury Tax in the early 1990s. It was a tax on luxury jewelry, luxury cars, and luxury boats.
The first year's expected tax revenue was several billion dollars, but the actual revenue was on the order of a few million. What it didn't take into account was that by raising the cost, people's spending behavior would change drastically.
I don't know specifically how it affected the jewerly and automobile business, but it certainly just about put ever American sailboat business out of business. They laid off nearly every builder and salesman around. If it hadn't have been repealed reasonably quickly, those business would likely have been gone for good.
One frequent argument is that the Fair Tax won't increase costs at all because the base charges of items will decrease by about as much as the Fair Tax. But the only possible way that can happen is if all the employees also take a pay cut so that their take-home pay after the Fair Tax is the same as before. You should know as well as I know that that is not going to happen. In reality, pre-taxes prices will stay pretty much the same and the Fair Tax would make everything far more expensive.
The Fair Tax also presupposes that it is revenue neutral. That is, the total tax revenue with the Fair Tax will not change from the total tax revenue of the current Income Tax. Since the Fair Tax will be collected only on the sales of new merchandise, the very wealthy who pay the vast majority of the income taxes will only be taxed on what they buy. If a person makes $10,000,000 a year, but only spends $500,000 a year and invests the rest, their total taxes would be approximately $167,000 for an effective tax rate of 1.67%.
Guess who will be making up that difference? Not the poor. It will be the middle class and lower upper class that will pay the vast amount of taxes. If you make $75,000 to $500,000 a year, expect your tax load to increase dramatically as the tax rate is increased to make up for the massive reductions in tax revenue as people change their spending habits.
The Fair Tax also supposed that the Income Tax will be abolished. That's not going to happen at all. In all likelihood, we would end up with both the Fair Tax and the Income Tax -- that's the only way they could bring up the same tax revenue as now -- the Fair Tax can't do it.
In that respect, the Fair Tax is kind of like a VAT. (Note that I didn't claim it is a VAT, but that it is kind of like a VAT.) What happened to all those countries that created a VAT? Did they get rid of their Income Taxes? Not hardly. Their combined taxes have climbed higher and higher as a result of having both.
Remember that any law that is passed including the Fair Tax, the law can easily be amended. It may require the abolishment of the Income Tax, but how long do you think it would be before it was quietly amended to keep both?
If we must have taxes, we need to go to a Flat Tax with very few deductions. My suggestion is two deductions -- a $15,000 deduction per family member and a $15,000 deduction per household. Thus, a single person with no kids would pay the tax on all income over $30,000 while a family of four would pay the tax on all income over $75,000.