An income tax would never work. People will work under the table left and right, the government will get no money, and we won't have any means of tracking people's work and ensure that they're reporting their wages as required.
Buying and selling under the table is already what goes on. Go to your local "bad part of town" and take a look at the people driving $150,000 cars who claim to make less than $10,000 on their income taxes, if they even file taxes at all. We already have a shadow economy of stolen good and drugs. But even the thieves still need to buy things for real at some point. A sales tax would be a way to get the free loaders and black marketeers to pay like the rest of us.
Agreed. At some point there needs to be a legitimate business. Even with a 25% tax, legitimate businesses will still dominate the market. The simplest method I can think to do that would be to require a federal business license in order to buy goods without the tax. In exchange you're subject to collecting sales tax and audits to make sure you do it right.
The implementations I've seen exempt used goods from sales tax, so YES, we would probably see a dramatic increase in durable vs throw away goods. That
good refrigerator might cost more than the cheap one, but I see major used goods markets popping up - and there's
nothing wrong with that.
It would also help stop outsourcing by reducing operating costs(payroll taxes) in the USA.