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?
As far as revenue neutrality is concerned, the ultimate say is analysis of CBO which will come when request by House Ways and Means. That is the only analysis that will mean anything as regards the legal requirement for such.
You must realize HR2525 is not a highly funded project, it is a grassroots effort being done on a very tight budget from person contributions and individual support. Most of the economic and statistical work was done back in 1997 with the writing of the bill for introduction into the House. This is not some party effort, it received its initial kick off from a group of small businessmen from Huston.
These are all PDF files, not HTML.
The Effects of Fundamental Tax Reform and the Feasability of Dynamic Revenue Estimation, in Joint Committee on Taxation, Congress of the United States, The Modeling Project and 1997 Tax Symposium Papers, Washington, U.S. Government Printing Office, November 20, 1997 (with P.J. Wilcoxen), pp. 130-151.
The Economic Impact of Fundamental Tax Reform, in M. Boskin (ed.), Frontiers of Tax Reform, Stanford, Hoover Institution, 1996, pp. 181-196; reprinted in Joint Economic Committee, Congress of the United States, Roundtable Discussion on Tax Reform and Economic Growth, One Hundred Fourth Congress, First Session, 1996, pp 98-112.
Lifting the Burden: Tax Reform and US Economic Growth; Dale Jorgensen, Harvard University; Office of Tax Analysis U.S. Department of Treasury, Aug 2 2002
This double whammy penalizes government vs. private expenditures
Obviously, but is what is happening in the current system. The Budget enforcement act is what demands the revenue neutrality, not considerations of efficiency of government. If we took efficiency into account, federal workers would not be taxed but would receive lower pay instead, EITC would not be necessary to offset FICA which could be done away with. We would be using point of sale taxes instead of individual and corporate taxes and exempt the government from paying those taxes. The national budget would be lower for lower costs of doing business and so would the tax rates necessary for funding government.
The reality is that government expends more than it should simply because there is no means to separate tax payments from the price structure of goods and services other than using a single stage Retail Tax that could allow government exempt purchases. Todate, social/political goals have been driving the tax code not logic or efficiency of the tax code.
The political situation is, without dynamic scoring of the budget and forced use of static analysis, such inefficiencies are demanded by the politics of the tax system debate. A sad commentary on the state of politics in this nation.
However, because we have an income/payroll/corporate tax system such penalties are the rule of the day, and are among many reasons why doing anything through the government is inefficient with regard to doing the same thing through private enterprise. Revenue neutrality demands we tax government to sustain the revenue take even in the face of "potential" reduction in the budget under dynamic considerations. The current political climate requires static analysis and no consideration of dynamic forces reducing the cost of government. Irrational, but that is what adherence to pre-existant law and the more liberal forces in the Congress demand.