Assuming a reasonable amount of tax evasion (20 percent) the FairTax would increase the deficit by about $10.6 trillion over 10 years. In order to avoid increasing the deficit 10 years later, the FairTax would have to be set at 64.4 percent.
And in fact, that’s probably too low. Assuming that, as the FairTax proponents suggest, the tax would apply to purchases by the government, that would effectively force state and local governments to cough up hundreds of billions of extra dollars to the federal government every year. If government purchases were exempted, as is normal for sales taxes, the revenue-neutral rate would be 81.6 percent.
The point is that at a 30 percent rate, it’s reasonable to expect the FairTax to increase the federal budget deficit by trillions of dollars a year.
FairTax, the GOP plan for a 30 percent national sales tax, explained