 Economists from the University of Tennessee concluded that while there would be many desirable macroeconomic effects , adoption of a national retail sales tax would also have serious effects on state and local government finances . Economist Bruce Bartlett stated that if the states did not conform to the FairTax , they would have massive confusion and complication as to what is taxed by the state and what is taxed by the federal government . In addition , sales taxes have long exempted all but a few services because of the enormous difficulty in taxing intangibles — Bartlett suggests that the state may not have sufficient incentive to enforce the tax . University of Michigan economist Joel <unk> argues that states would face significant issues in enforcing the tax . " Even at an average rate of around five percent , state sales taxes are difficult to administer . " University of Virginia School of Law professor George Yin states that the FairTax could have evasion issues with export and import transactions . The President 's Advisory Panel for Federal Tax Reform reported that if the federal government were to cease taxing income , states might choose to shift their revenue @-@ raising to income . Absent the Internal Revenue Service , it would be more difficult for the states to maintain viable income tax systems . 
