Others are calling this the VAT, Value Added Tax.  I believe SAD Tax would be a more appropriate name, Suck All Dry or Suck Anything Dry (SAD) Tax.  This is what a VAT tax is.  The Value Added Tax adds no value.  It adds only cost.  It compounds itself at each stage of the production process and tax is ultimately calculated on top of tax before it gets to the consumer who ultimately pays the entire tax.  The portion of that tax that is paid directly is on the receipt labeled as a tax.  The portion paid earlier by all the producers who had a part in creating that item is on the receipt as well but is hidden in the item price.  Understand this if you understand nothing else, don't be fooled, the consumer pays the entire tax. 

A reasonable way to review the likely value of a SAD/VAT Tax is to look at other countries where these taxes are employed and also to look at variations like Canada that rely upon this tax to cover their socialist medicine experiment.  Most arguments I have recently heard speak to the onerous taxation by VAT taxes in Europe.   I’ll use more conservative estimates by pointing to Canada.  The reader can make his / her own adjustments to account for the fact that Canada only has to pay for the healthcare of 35 million people, a little more than 1/10th the population of the United States.  They also do not finance a military anwhere near the size of the US Military.  

Today Canada employs a ‘Goods and Services Tax’ (GST), a ‘Provisional Sales Tax’ (PST) and a ‘Harmonized Sales Tax’ (HST).  The HST is a tax that some provinces employ that combines the GST and PST and collects them as a single tax.  But more importantly, in 1991 the government created these taxes to replace their ‘Manufacturers Sales Tax’ (MST) a hidden Value Added Tax which was the calculated equivalent of a 13.5% total tax.   Like other Value Added Taxes, the MST taxed each step of the production process and this tax was hidden at each ensuing level of the production process as it was incorporated into the price of all manufactured goods.   The rate was probably small but the average impact to the consumer was a collective 13.5% on average.    

State and Local Sales Taxes are similar to the GST and the PST in that the only stage of the process that is taxed is the final sale to the consumer.   As long as the sale from a supplier to a manufacturer is a cost that becomes a part of the final manufactured product the purchase is exempt from the tax.  In the US this tax is not collected at all whereas in Canada the examples I am familiar with involved the collection of the tax at the time of invoice with a later reimbursement from the government.  Thus an additional cost of business was the fronting of cash to the government to allow them to use that cash for a period of time before it would be reimbursed. 

When given the choice of a GST type tax or a VAT type tax it is probably better to see the entire tax collected at the consumer level because in this way the taxpayer knows the impact on the economy that is caused by the Congress and the cost of the actual goods from the manufacturers.   Congress, on the other hand, will likely prefer a VAT so that they won’t be seen as levying huge tax increases but they will nevertheless benefit immensely from the process at the expense of all consumers, rich or poor.  

Are you a baker?  The flour you purchase will already have the VAT included in the price you pay and that has been the result of multiple steps from the farmer and the mill and even prior to the farmer in the cost of the seed he purchases.   The paper used in packaging, the printing on that paper to identify and advertise the producer; the cost to bleach the flour; the cost to ship it; etc. are all expenses that would each carry VAT but you as the baker would not know how much of that price you pay is in the form of taxes.  You will understand it is there and you also know it is there in a compounded fashion because you will pay the tax on the combined price from the producers of your raw materials which already has a tax component in that price. 

Much has been made of the concept of a Fair Tax.   This would be a Consumption Tax, like the GST.  This would essentially be a National Sales Tax.  Comments I have heard regarding a Fair Tax have at their core the expectation that the 16^th Amendment that created the Income Tax would first have to be repealed.   The advantages are two-fold. 

1. Everyone would be a taxpayer and as a result everyone would have an interest in reducing government spending and promoting efficiency.
2. Those persons of higher income would logically pay more tax because we can anticipate their consumption would be higher.

Unless the creation of a national sales tax or a VAT Tax is coupled with a repeal of the 16^th Amendment our nation would experience disastrous consequences within our economy.   Not could, but would experience disastrous consequences.  One might be able to rationalize paying an extra 15% tax on a luxury boat when the cost of the boat is 25% or 30% less expensive because the boat builder no longer pays an Income Tax and because the consumer himself is also not burdened by that Income Tax.  It is also true that more control is held by the consumer/taxpayer with the GST type tax.  The consumer can delay or suspend purchasing altogether as an means to avoid paying the tax. 

Does everyone recall what happened when the Congress slapped a luxury tax on expensive boats?   New England boat makers began to drop out of business like flies near a cold window and a lot of shipbuilders were suddenly unemployed in New England.  The reason is economic law that is incapable of repeal.  The luxury tax on top of the price of the boat was the catalyst to sales prospects to buy their boats elsewhere or not buy the boat at all.  The tax priced prospective buyers out of the market.   Why would anyone think a VAT would not do the same thing unless incorporated with the elimination of the Income Tax?  The government will collect the tax on essentials like groceries, gas, oil, utilities, etc.  But you might as well kiss those discretionary purchases goodbye or expect them to be delayed until a later day.  

This is basic economics folks.   The more you tax something, the less you ultimately will have of it.  If the Obama, Pelosi, Reid Axis of Evil is intent on taxing all that moves and is productive in this economy it will not be long before little is moving and nothing is productive.  Sadly we can probably anticipate the advent of a SAD Tax because this is all these people understand.  They are not business people.  They do not understand markets or how they are influenced and the issue extends beyond the simple raising of revenues.  These people also want to control.  Unfortunately what they will end up controlling will be when taken to its extreme, the economy of a third world nation.