[pmoriarty]

Think about this. You've just gone through a lengthy and highly selective interviewing process. You've succeeded where many others have failed. The company has invested a lot of its employees' valuable time in interviewing you. They've decided you are a good fit and are skilled enough for the role. There are no red flags (like a criminal history, ineligability to work in the country, etc) that would prevent them from hiring you. Then they ask how much you made at your previous company and you refuse to tell them.

Do you really think that after all that time and effort, after sifting through a mountain of undequalified candiates, they would now turn around and let a qualified, well-fitting candidate slip through their fingers over a bit of irrelevant trivia? Not on your life.

Demanding you tell them your previous salary or they'd cancel your application was a bluff, pure and simple. Same with them pretending that you were in no position to negotiate once they'd chosen you and make you an offer. Companies always start low and expect to be negotiated up, at least a little. And once they choose you and made you an offer, the power is in your hands. "Take it or leave it" is a bluff.