Because it helps align incentives. You can have a 7% tax on sales, or a 5% tax on sales plus a 2% tax based on a noisy correlate. The latter will raise more revenue at a lower excess cost.
> You can't shield from that tax. All entities pay, for every sale, no refunds.
That would make it a tax on revenue, which is quite distortionary indeed and generally considered a last-resort. (Or you could have a VAT, where all entities pay but tax paid on non-final sales is refunded. VATs are quite good but not totally free of this kind of gaming.)
I see. Well we seems to have different goals. As I see it, government is mostly good at destroying wealth, and so I aim to minimize their revenue.
> That would make it a tax on revenue, which is quite distortionary indeed and generally considered a last-resort. (Or you could have a VAT, where all entities pay but tax paid on non-final sales is refunded. VATs are quite good but not totally free of this kind of gaming.)
I am essentially suggesting a non-refundable, uniform VAT
The "excess cost" I was referring to is precisely a matter of destroying wealth. It's all well and good to limit government involvement in the economy but clearly, whatever revenue it does collect should be collected efficiently.
What do you care about ability-to-pay?
> ...also, because people might try to disguise income/expenses as investment-related in order to shield them from taxation, and having a more uniform tax base helps prevent this.
You can't shield from that tax. All entities pay, for every sale, no refunds.