This is exactly what I have been asking for. All of the adjustments to personal expenditures are approximately a wash except state, local, and federal expenditures. I'm not sure I agree with the treatment. Using 1995 numbers, it says, in effect, last year we raised $1.3T in taxes from citizens. Had we had an NRST in place, we would have raised (approximately) 80% of that amount from citizens and 10% of that amount from taxing state, local governments and 10% from taxing federal expenditures.
I disagree with the validity of this treatment. Let's look at state expeditures. In order to afford what they could under the income tax, state and local government will have to raise 30% more revenue. The federal government is exactly in the same place in that they now pay $130 for what used to cost $100, but they get the $30 in tax. HOWEVER, to then count the $30 toward the goal of raising the same revenue as in the prior year appears incorrect. If that makes sense, why not tax ONLY government purchases at 100%, thereby raising enough to pay for government! This looks like double counting unless I'm missing something.
If I am right, a 26% (tax inclusive)/35% tax exclusive rate would be needed for neutrality---assuming all other CATO numbers are accurate and appropriate (I have no reason to think otherwise at this point.)
I disagree with the validity of this treatment. Let's look at state expeditures. In order to afford what they could under the income tax, state and local government will have to raise 30% more revenue.
Just how does the state end up having to raise 30% more revenue just because the federal government ends up with the same tax revenue after enactment of an NRST as before?
Your claim makes no sense at all.
State expenditures do not go up 30% for a change in the mode (not quantity) of federal taxation. In fact the NRST compensates the states for administering the NRST and, at least in the opinion of the Texas Comptroller's office, this represents no problems to the state at all.
Committee on Ways and Means, Full Committee, 4-11-00 Testimony Carole Keeton Rylander, the Texas Comptroller of Public Accounts, was delighted to receive an invitation to testify before this committee regarding the Fundamental Tax Reform measures under consideration today. Last year, the Texas Comptroller collected
http://waysandmeans.house.gov/fullcomm/106cong/4-11-00/4-11hami.htm
Had we had an NRST in place, we would have raised (approximately) 80% of that amount from citizens and 10% of that amount from taxing state, local governments and 10% from taxing federal expenditures.
Government does tax itself through consumption purchases now. Nothing about the NRST changes the amount of such taxation it just separates it out into a specific declaration on the price tag of goods and services instead of being embedded in the price as an inflationary component and hidden from easy view:
The following article covers the mechanism on how the current Federal tax system propagates and is embedded into consumption expenditure.
DO YOU PAY YOUR INCOME TAX
AT THE SUPERMARKET?
by D. Sherman Cox J.D. L.L.M. Taxation
The same principle is true of state taxation.
That is why the NRST does not exempt federal consumption purchases from the NRST.
Actually if it did, it wouldn't matter as the costs of government would decline by the amount that they currently receive through via government consumption purchases arising from taxes on business that of necissity pass through business receipts that businesses can pay any tax, wages on which taxes are paid, etc. at all.
This looks like double counting unless I'm missing something.
You are missing something. Government pays taxes to itself via consumption spending under the current system.
If I am right, a 26% (tax inclusive)/35% tax exclusive rate would be needed for neutrality
Only thing is, you are not correct in your analysis, The tax government pays is embedded in current shelf price, Under the NRST, the tax is explicitly stated, separated out leaving a lower shelf price(about 22-23% lower from the difference in embedded taxes), plus tax, for essentially the same total actual expenditure overall.
Actually, because the costs of tax compliance are much lower for retail sales tax accounting and payment(less than 10% of the income/payroll tax scheme), as opposed to income tax accounting, planning and litigation costs. The overall price of consumption goods and services plus NRST should actually trend lower. Government costs in interest rates on national debt and for consuption expenditure would thus be lower allowing more bang for the buck of revenue received.
Your concerns are of no impact in the final result. And in fact the overall picture is marketedly improved as far as advances in standard of living arising from greater economic/commercial efficiencies under an NRST vs the current income/payroll tax system.