Right you are correct, I think we are speaking past each other and that may be my fault, I read somewhere in the thread about the risk of being terminated if the employer found out and my point was more to that fact.
But yes, you do run the risk of not getting the job for being perceived as lying. For me personally as a (small I employ 4 guys) employer, it would not amount to a hill of beans to me, if I found out a prospect inflated his salary.
I just have a hard time viewing it as lying in the traditional sense. Culturally we negotiate when it comes to jobs and if I asked someone to hand over information that would give me a strong advantage at the negotiation table, I would expect that information to not be accurate.
The only reason to ask that question is to strengthen your position at the negotiating table, so in effect the person asking is being just as dis-ingeniousness as the person inflating. To call foul on the other guy for trying to strengthen his position when the other side is doing the same, reeks of a double standard.