Originally Posted by Villages Kahuna

Actually, Richie, a sales tax puts more money into the government's pockets and results in much higher prices to consumers than a VAT tax. In that sense, I hope you're wrong and that Cain's plan really is a VAT tax.

Let's take a really simple example. A fabricator buys steel from a steel mill, fabricates a product, and sells it to a consumer. Let's assume that each company in the supply chain marks up his costs by double to create a selling price for his product.

VAT Tax Example

• Steel company buys taconite from mining company for $1,000 (that includes $90 in VAT tax buried in the selling price)
• Steel mill produces and rolls steel and sells it to the fabricator for $2,000 (that includes $180 in VAT tax included in the selling price of the steel)
• The fabricator produces a product and sells it to a consumer for $4,000 (that includes $360 in VAT tax)
• Total VAT tax paid to provide the product to the end-user is $630.

Sales Tax Example

• Mine sells taconite to steel company for $1,000. Steel company has to pay $1,090 including a 9% sales tax of $90
• The steel company produces and rolls steel and sells it to the fabricator for $2,180. The fabricator has to pay 9% sales tax on the purchase steel, a total of $2,376
• The fabricator sells his product, made with the steel, to a consumer for $4,752. The consumer has to pay a 9% sales tax of $428, bringing his purchase price to $5,180
• Total "sales taxes" collected in the process of producing and selling this product to an end-user = $714

Many have described the plan Cain sets forth as a VAT tax. If it is actually a sales tax as you assert, the total taxes paid to the government would be $714, about 13% more than if the tax regime was a VAT tax. More importantly, the consumer would have paid a purchase price of $5,180 instead of $4,000 under the VAT tax regime, almost a 30% premium in purchase price.