The 60 Second Update with

Congressman John Linder

4. Without an Income Tax, wouldn't this create an underground economy?

I do not believe that the FairTax will create an underground economy in which people will barter for the purpose of avoiding the payment of Federal taxes. Approximately two percent of the nation’s retailers and service providers, such as Wal-Mart, collect 81 percent of the total revenues collected annually. Our current income-based tax system has a compliance rate of approximately 83.7 percent. This means that even if only the largest two percent of all retailers and service providers comply with the FairTax, 81 percent of all taxes due would be collected, a two percent difference from the compliance rate under the current system. I firmly believe that large corporations like Wal-Mart will absolutely not risk the severe penalties under the FairTax to barter with individuals like you and me.

 Question 5. Why is the FairTax better than the Flat Tax?