VAT, FairTax, and taxes on earned income and profits are all taxes on consumption (see below).
Since there can be no capitalism without capital, taxes on capital/investment at all stages must be avoided.
However, citizens (through the legislators they elected) demand the level of government that must be paid for. It is critical that we minimize the size of government, since that expense must be paid through taxation, borrowing, or inflated currency. Focusing on taxation alone misses the big picture, but it is important to avoid mal-incentives created by misguided tax policy.