So how does this big tax work? A VAT is a tax on “value added” in the economy. Businesses collect it on their total revenues, minus the cost to buy the stuff they resold. A retailer pays the tax on sales to consumers, minus what he paid wholesalers for product. A wholesaler pays on his sales to retailers, minus what he paid to manufacturers. A manufacturer pays on his sales after the cost of parts, and so on.

When you add it all up, it’s equivalent to a very broad sales tax on all the goods and services in the economy. Most other advanced countries have a tax like this, with exceptions for favored sectors like education and health care. Mr. Cruz says he would tax everything, which is how he could raise so much money with a rate of 16 percent.

Some people contend this tax is likely to be very unpopular once people figure out what it is, and that’s probably true. Conservatives tend to dislike a VAT because it is a quiet, efficient way for the government to tax a lot. (“VAT is a French word for Big Government,” the anti-tax activist Grover Norquist tweeted in 2014.) Liberals object that these taxes disproportionately hit the poor, since they apply at a flat rate to consumption, and the poor consume more of their income than the rich do.

But some people misunderstand the horrors of VATs. In particular, they assume a new, large VAT will cause a sharp rise in prices, as businesses simply add the tax onto the price of goods and services. But that would only happen if the Federal Reserve let inflation rise.

New taxes may increase the cost of doing business, but overall price levels can only rise if central banks adopt monetary policy that allows them to. You may have noticed that, over the last decade, the United States and other advanced countries had sharply fluctuating fiscal policy, including significant changes in tax rates, but low and stable inflation. That’s because the link between taxes and prices is not automatic.