[...Suddenly you're paying a 25% tax on a product, and there's no way to fight it. Where do you start? The tax on the paint? The tax on cardboard? There are soon so many (tax)strings attached to the product there's no way to unravel them...]
Can you give an historical example other than existing surcharges and tarrifs?
I'm a bit late in responding
A value added tax (sometimes called a goods and services tax, as in Australia and Canada) applies the equivalent of a sales tax to every operation that creates value. To give an example, sheet steel is imported by a machine manufacturer. That manufacturer will pay the VAT on the purchase price, remitting that amount to the government. The manufacturer will then transform the steel into a machine, selling the machine for a higher price to a wholesale distributor. The manufacturer will collect the VAT on the higher price, but will remit to the government only the excess related to the "value added" (the price over the cost of the sheet steel). The wholesale distributor will then continue the process, charging the retail distributor the VAT on the entire price to the retailer, but remitting only the amount related to the distribution markup to the government. The last VAT amount is paid by the eventual retail customer who cannot recover any of the previously paid VAT. Economic theorists have argued that this minimises the market distortion resulting from the tax, compared to a sales tax. However, VAT is held by some to discourage production.
Here are some easy examples from the net:
http://www.computerworld.com/industrytopics/retail/story/0,10801,68601,00.html
"Fictionwise and other businesses that sell digital downloads such as music and software, as well as subscription-based pay-per-view television and radio, will have to apply the VAT on each sale and remit the tax payment. VATs range from 15% to 25%, depending on the country."
http://www.ideamerge.com/motoeuropa/vat/chapter/
Most European governments impose a value-added tax or VAT—a national sales tax of sorts—on goods and services. It's usually about 20 percent and is buried in the price.
You can see that it's easy for the government to tack on an incremental increase at some point in the production process from raw materials to finished product, and that the 'location' of the tax increase can be easily hidden from consumers.
I see what you are getting at here. And to a hideous extent it has already happened in the auto and fuel industries. If the Fair Tax could work there would have to be a built in transparency. Otherwise... multiples of taxation exists without representation. Am I getting this correctly?
I believe you made your point that this would not discourage illegal workers. But do you agree that we need a way to support them other than middle class taxpayers?
A VAT is not a "national sales tax of sorts" and especially is it not at all like the FairTax.
A VAT is, good, however at causing some tax costs to be embedded in the price of goods and of promoting a huge increase in governmental regulation - which we've had plenty of already, thank you.
The FairTax is definitely not a VAT.