The FairTax: Retired Drug Dealer Scenario

So the dealer is 55 and survived. He's got 2,000,000 in laundered
cash in safe deposit boxes and lives on $2400/mo (should last him
'till he's 90 or 95 if inflation doesn't go too wild). He doesn't
make any money, so he's not paying any income tax (zero income tax).
The taxes he's paying include 1) state sales tax, 2) embedded taxes on
the goods and services he buys, and 3) inflation.

Under the CURRENT INCOME TAX scenario, annually he pays:

1a) Regular State Sales Tax: 0.06 * 800 * 12 = $576
1b) Food State Sales Tax: 0.03 * 800 * 12 = $288
1c) Rent and other no sales tax items: 0.00 * 800 * 12 = $0

2) Embedded taxes on goods & services: 0.20 * 2,400 = $480

3) Inflation: 0.03 * 2,400 * 12 = $864
(he's figured out to keep the same standard of living, he will
increase
the number of dollars, to just sustain his standard of living, so in
future years the dollar count will be higher, but he's not so dim as
to just spend $2M divided by 40 and expect it to last).

So he's paying 1a, 1b, 2, and 3, for a total of $2,208 in taxes.

Under the PROPOSED FAIR TAX scenario, annual he pays:

1a) Same: $576
1b) Same: $288
2) Zilch!: $0
3) Same: $864
4) FairTax goods: 0.30 * 1600 * 12 = $5,760

So our drug dealer would go from paying $2,208 annually to paying
$7,488 - a 240% increase in total tax, and over 1000% increase in
federal taxes (since before, all he paid was the embedded taxes in the
goods he bought).

We all want this guy to pay more taxes, of course. And it looks like
he will. Under the proposed FairTax, this guy will pay more
taxes....is this right? If not, what specific adjustments need to be
made to the calculations to make it correct?

--Dale--
.

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