As somebody else said, the issue is compared to what.
For virtually the entire population
> the effect would be progressive, compared to the present system. This is
If the 'what' is the Federal income taxes (personal and corporate, plus AMT's) and payroll taxes, simulations of the effect would probably find a flat tax to be more regressive.
> much more strongly the case for the payroll tax, which is actually
> regrssive because of the cutoff on taxable wages, but would be progressive
> if the cutoff was eliminated and an exemption for the first few thousand
> dollars instituted. A VAT would be a very progressive tax, and probably
> the best of all in efficiency and unavoidability, if the entire VAT on an
> amount equal to the cost of a basic health and decency consumption level
> was refunded to every individual--including the unemployed, welfare
> recipients, prisoners, etc.
A VAT with a demogrant is not a VAT anymore. It's just an upside-down flat tax with an exemption. Probably worse than a flat tax because more of the VAT would fall on consumption. The VAT is keyed to transactions so there would be more upward pressure on the price level and an impact on consumers. The flat tax is keyed to individual wages and business firm income net of investment spending, which decreases the likelihood of a price effect (e.g., the burden would be on workers and owners of capital).
cheers,
mbs