My interest is in trying to accurately reproduce the NRST calculation on 1999 data for the purpose of comparing it to the JCT distribution of tax burden data.
One problem with the JCT data to watch out for in your comparisons, it does not account for the incidence of corporate income taxes, or estate and gift taxes on individuals. Taxes which are also repealed under the NRST.
Corporate income taxes are about 3% of overall gross family income. estate & gift taxes around another 1%. Both are considered to impact more on upper income more than lower income groups. Though that is a debatable point. Economists differ on how to look a incidence of such taxes, especially corporate income & the business remittence of FICA.
That's true. However, since I'm only interested in the distribution of the tax burden that 4% will not be a major issue. Including state, local, and federal consumption in the tax base, Burton & Mastromarco concluded that a 21.1% tax inclusive rate would have raised sufficient revenues in 1995 to replace corporate and individual income taxes, FICA, excises, and the Estate tax. However, including federal government and state government consumption and "gross purchases" in the tax base is methodologically flawed. Using their data for all other numbers, a 24.3 tax inclusive rate would have been necessary to raise the required revenue in 1995.
B&M adjusts the 1995 personal consumption data of $4.9T that produces a projected tax base of $5.9T. Over $1.3T of the adjustment is for the abovementioned government consumption. While I understand what B&M say justifies this treatment, the reasoning is flawed. Please understand that I am not saying that I disagree with the inclusion of these numbers in the base. I I readily acknowledge that what is or is not included in the base is, essentially, a judgment call. I am saying their math is flawed. Let me explain why.
Let’s look, first, at Federal consumption. Things that cost $100 before would cost $130 after and $30 of it is the tax. (Note: B&M and I ignore any price changes resulting from the NRST). No revenue is raised, however, relative to the current situation. You still have the same services and have raised no money toward it. If such a process actually raised revenue, then a 1000% tax on government consumption would generate all the money and we could happily forget all other taxes!
With regard to taxing state and local government consumption, the federal government does gain revenue but the cost of state and local government would go up by exactly the same amount. There is no net gain once the offsetting state and local taxes come into play. Therefore, both of these adjustments require an equal offsetting adjustment requiring higher revenues offsetting the tax or we can eliminate them from consideration.