This is absolutely false.
Any underground economy transaction that isn't captured by the income tax (e.g. drug deals) won't be captured by a sales tax.
Any legal transaction (e.g. the purchase of a fancy Cadillac) will be captured by either an income tax and a sales tax.
I wasn't refering to drugs and other illegal activiies, or for that matter, barter deals.
Any legal transaction (e.g. the purchase of a fancy Cadillac) will be captured by either an income tax and a sales tax.
What you say is trivially true, but it omits the discussion about the portion of tax collected.
IN an income tax, the portion collected represent the taxes that everyone pays on purchases - and this represents only a portion of tax burden. If a drug dealer pays no income or payroll tax on his illegal income, he does still pay embedded taxes in prices as you noted. But he pays nothing more. Today, embedded taxes represent one of three components of ones tax burden... there are embedded taxes, income taxes, and payroll (self-emp) taxes. A drug dealer only pays a portion of his tax burden (the embedded portion). He does not pay income or payroll tax on his illegal money.
Contrast this to a sales tax situation; ie ones entire tax burden is comprised of a single component - taxes on purchases. Hence under a sales tax (like hr 25), the drug dealer begins paying his FULL share of taxes.
Under the income tax, the drug dealer pays only a portion of his taxes (embedded tax in prices). He does not pay the remainder of his taxes in income and payroll tax.
Under the nrst, the drug dealer pays his full share of taxes.
It should be obvious that the drug dealer pays more tax under an nrst - meaning the rest of us don't have to carry him any longer.
I'm not saying more money is collected from underground with an nrst, I'm saying that it comes from who it should come from - which is obviously better.
This being said, I don't know if an nrst would reduce illegal immigration - but it WOULD begin collecting the maximum rate from them.