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.
Under the sales tax system outlined in this study, government output would not be exempted from the sales tax. Hence, government output is included in the tax base. Since this is an issue of some controversy, the following is a brief explanation of the logic for this tax treatment.
Burton and Mastromarco explain the basis of their position in the 6 paragraphs immediately following the above excerpt. I understand their reasoning---I just think the reasoning is flawed. They justify their inclusion of government purchases as being necessary to not unduly favor government over private. Their actions actually create the opposite bias. They claim they are merely taxing government as they do in the current system. But they are already taxing the purchases of government employees. This double whammy penalizes government vs. private expenditures while claiming to remove a bias in favor of government service. In the final analysis, of course, whatever is included in the tax base is arbitrary. Therefore, I’ll use their base for now to see the ramifications they have on the distribution of the tax burden.
Do you know where I can get recent data for the items in Table 1 of the Burton Mastromarco report?