[kevkrom]

As I pointed out earlier, if you want to use tax-exclusive rates, that's not a problem. But since we're comparing the NRST to the taxes it replaces (payroll and income taxes), then we'll have to use tax-exclusive versions of those rates so that we can compare equitably.

But I don't think we want to go there, because income and payroll taxes are much more difficult to deal with in those terms. For eaxmple, the "employee's share" of FICA (7.65% tax-inclusive) is 8.28% tax-exclusive, but for self-employment, which is double the amount of tax collected (15.3% tax-inclusive), the corresponsing tax-exclusive rate 18.1%. But because of how this percentage is calculated, the latter number (18.1%) is more than double the former (8.28%) even though the actual tax collected is exactly double.

Now that is confusing.

[Principled]

Under our current system, For eaxmple, the "employee's share" of FICA (7.65% tax-inclusive) is 8.28% tax-exclusive, but for self-employment, which is double the amount of tax collected (15.3% tax-inclusive), the corresponsing tax-exclusive rate 18.1%. But because of how this percentage is calculated, the latter number (18.1%) is more than double the former (8.28%) even though the actual tax collected is exactly double.

This bears repeating.

[kevkrom]

BTW, for those interested in how to do the calculations...

re = t / b
ri = t / ( b + t )

That is, the tax exclsuive rate is the amount of tax divided by the basis; the tax-inclusive rate is the amount of tax divided by the basis plus the tax.

For a sales tax, the basis is simple -- it's the pre-tax price of the item. For income taxes, the basis is actually the post-tax income, i.e., income - taxes. Substituting ( i - t ) for b in the above formulas:

re = t / ( i - t )
ri = t / ( i - t + t ) = t / i