Public finance / Harvey S. Rosen, Ted Gayer.

Includes bibliographical references (p. 570-582) and indexes.

Table of Contents

Part 1
GETTING STARTED
CHAPTER 1
INTRODUCTION
Public Finance and Ideology
Organic View of Government
Mechanistic View of Government
Viewpoint of This Book
Government at a Glance
The Legal Framework
The Size of Government
Expenditures
Revenues
Our Agenda
Summary
Discussion Questions
Appendix: Doing Research in Public Finance
CHAPTER 2
TOOLS OF POSITIVE ANALYSIS
The Role of Theory
Causation versus Correlation
Experimental Studies
Conducting an Experimental Study
Pitfalls of Experimental Studies
Observational Studies
Conducting an Observational Study
Pitfalls of Observational Studies
Quasi-Experimental Studies
Conducting a Quasi-Experimental Study
Pitfalls of Quasi-Experimental Studies
Conclusions
Summary
Discussion Questions
CHAPTER 3
TOOLS OF NORMATIVE ANALYSIS
Welfare Economics
Pure Economy Exchange
Production Economy
The First Fundamental Theorem of Welfare Economics
Fairness and the Second Fundamental Theorem of Welfare Economics
Market Failure
Market Power
Nonexistence of Markets
Overview
Buying into Welfare Economics
Summary
Discussion Questions
Part 2
PUBLIC EXPENDITURE: PUBLIC GOODS AND EXTERNALITIES
CHAPTER 4
PUBLIC GOODS
Public Goods Defined
Efficient Provision of Public Goods
Deriving the Efficiency Contribution
Problems Achieving Efficiency
The Free Rider Problem
The Privatization Debate
Public versus Private Provision
Public versus Private Production
Public Goods and Public Choice
Summary
Discussion Questions
Appendix: Preference Revelation Mechanisms
CHAPTER 5
EXTERNALITIES
The Nature of Externalities
Graphical Analysis
Implications
Conclusion
Private Responses
Bargaining and the Coase Theorem
Mergers
Social Conventions
Public Responses to Externalities: Taxes and Subsidies
Taxes
Subsidies
Public Responses to Externalities: Emissions Fees and Cap-and-Trade Programs
Emissions Fee
Cap-and-Trade
Emission Fees versus Cap-and-Trade
Command and Control Regulation
The US Response
Progress with Incentive-based Approaches
Implications for Income Distribution
Who Benefits?
Who Bears the Cost?
Positive Externalities
A Cautionary Note
Summary
Discussion Questions
CHAPTER 6
POLITICAL ECONOMY
Direct Democracy
Unanimity Rules
Majority Voting Rules
Logrolling
Arrow?s Impossibility Theorem
Representative Democracy
Elected Politicians
Public Employees
Special Interests
Other Actors
Explaining Government Growth
Controlling Government Growth
Conclusions
Summary
Discussion Questions
CHAPTER 7
EDUCATION
Justifying Government Intervention in Education
Is Education a Public Good?
Does Education Generate Positive Externalities?
Is the Education Market Inequitable?
What Can Government Intervention in Education Accomplish?
Does Government Intervention Crowd Out Private Education?
Does Government Spending Improve Educational Outcomes?
Public Spending and the Quality of Education
Does Education Increase Earnings?
New Directions for Public Education
Charter Schools
Vouchers
School Accountability
Summary
Discussion Questions
CHAPTER 8
COST-BENEFIT ANALYSIS
Present Value
Projecting Present Dollars into the Future
Projecting Future Dollars into the Present
Inflation
Private Sector Project Evaluation
Internal Rate of Return
Benefit-Cost Ratio
Discount Rate for Government Projects
Rates Based on Returns in the Private Sector
Social Discount Rate
Government Discounting in Practice
Valuing Public Benefits and Costs
Market Prices
Adjusted Market Prices
Consumer Surplus
Inferences from Economic Behavior
Valuing Intangibles
Games Cost-Benefit Analysts Play
The Chain-Reaction Game
The Labor Game
The Double-Counting Game
Distributional Considerations
Uncertainty
An Application: Are Reductions in Class Size Worth It?
Discount Rate
Costs
Benefits
The Bottom Line and Evaluation
Use (and Nonuse) by Government
Summary
Discussion Questions
Part 3
PUBLIC EXPENDITURE: SOCIAL INSURANCE AND INCOME MAINTENANCE
CHAPTER 9
THE HEALTH CARE MARKET
What?s Special about Health Care?
The Role of Insurance
The Role of Risk Pooling
Adverse Selection in the Health Insurance Market
Insurance and Moral Hazard
Other Information Problems in the Health Care Market
Externalities of Health Care
Do We Want Efficient Provision of Health Care?
Paternalism
The Problem of the Uninsured
High Health Care Costs
Concluding Remarks
Summary
Discussion Questions
CHAPTER 10
GOVERNMENT AND THE MARKET FOR HEALTH CARE
Private Health Insurance
The Implicit Subsidy for Employer-Provided Insurance
The Advantages of Employer-Provided Health Insurance
Employer-Provided Health Insurance and Job Lock
Cost Control and Private Insurance
Government Provision of Health Insurance: Medicare and Medicaid
Medicare: Overview
Cost Control under Medicare
Medicare: Impacts on Spending and Health
Medicaid: Overview
Medicaid: Impacts on Health
Health Care Reform
Individual Mandates
Health Savings Accounts
Single Payer
Final Thoughts
Summary
Discussion Questions
CHAPTER 11
SOCIAL SECURITY
Why Have Social Security?
Consumption Smoothing and the Annuity Market
Adverse Selection and the Annuity Market
Other Justifications
Structure of Social Security
Basic Components
Distributional Issues
The Trust Fund
Effects of Social Security on Economic Behavior
Saving Behavior
Retirement Decisions
Implications
Long-Term Stresses on Social Security
Social Security Reform
Maintain the Current System
Privatize the System
Conclusions
Summary
Discussion Questions
CHAPTER 12
INCOME REDISTRIBUTION: CONCEPTUAL ISSUES
Distribution of Income
Interpreting the Distributional Data
Rationales for Income Redistribution
Simple Utilitarianism
The Maximin Criterion
Pareto Efficient Income Redistribution
Nonindividualistic Views
Other Considerations
Expenditure Incidence
Relative Price Effects
Public Goods
Valuing In-Kind Transfers
Reasons for In-Kind Transfers
Conclusion
Summary
Discussion Questions
CHAPTER 13
EXPENDITURE PROGRAMS FOR THE POOR
A Quick Look at Welfare Spending
TANF
Income Maintenance and Work Incentives
The Basic Trade-offs
Analysis of Work Incentives
Work Requirements
Time Limits
Family Structure
National versus State Administration
The Earned Income Tax Credit
Supplemental Security Income
Medicaid
Unemployment Insurance
Benefits
Financing
Effects on Unemployment
Food Stamps and Child Nutrition
Housing Assistance
Programs to Enhance Earnings
Education
Employment and Job Training
Overview
Summary
Discussion Questions
Part 4
A FRAMEWORK FOR TAX ANALYSIS
CHAPTER 14
TAXATION AND INCOME DISTRIBUTION
Tax Incidence: General Remarks
Only People Can Bear Taxes
Both Sources and uses of Income Should Be Considered
Incidence Depends on how Prices Are Determined
Incidence Depends on the Disposition of Tax Revenues
Tax Progressiveness Can Be Measured in Several Ways
Partial Equilibrium Models
Unit Taxes on Commodities
Ad Valorem Taxes
Taxes on Factors
Commodity Taxation without Competition
Profits Taxes
Tax Incidence and Capitalization
General Equilibrium Models
Tax Equivalence Relations
The Harberger Model
Analysis of Various Taxes
Some Qualifications
An Applied Incidence Study
Conclusions
Summary
Discussion Questions
CHAPTER 15
TAXATION AND EFFICIENCY
Excess Burden Defined
Questions and Answers
Excess Burden Measurement with Demand Curves
Preexisting Distortions
The Excess Burden of a Subsidy
The Excess Burden of Income Taxation
Differential Taxation of Inputs
Does Efficient Taxation Matter?
Summary
Discussion Questions
Appendix A: Formula for Excess Burden
Appendix B: Multiple Taxes and the Theory of the Second Best
CHAPTER 16
EFFICIENT AND EQUITABLE TAXATION
Optimal Commodity Taxation
The Ramsey Rule
Equity Considerations
Summary
Application: Taxation of the Family
Optimal User Fees
Overview
Optimal Income Taxation
Edgeworth?s Model
Modern Studies
Politics and the Time Inconsistency Problem
Other Criteria for Tax Design
Horizontal Equity
Costs of Running the Tax System
Tax Evasion
Overview
Summary
Discussion Questions
Part 5
THE UNITED STATES REVENUE SYSTEM
CHAPTER 17
THE PERSONAL INCOME TAX
Basic Structure
Defining Income
Items Included in H-S Income
Some Practical and Conceptual Problems
Evaluating the H-S Criterion
Excludable Forms of Money Income
Interest on State and Local Bonds
Some Dividends
Capital Gains
Employer Contributions to Benefit Plans
Some Types of Saving
Gifts and Inheritances
Exemptions and Deductions
Exemptions
Deductions
Impact on the Tax Base
Tax Expenditures
The Simplicity Issue
Rate Structure
Effective versus Statutory Rates
Taxes and Inflation
How Inflation Can Affect Taxes
Coping with the Tax/Inflation Problem
The Alternative Minimum Tax
Choice of Unit and the Marriage Tax
Background
Analyzing the Marriage Tax
Treatment of International Income
State Income Taxes
Politics and Tax Reform
Summary
Discussion Questions
CHAPTER 18
PERSONAL TAXATION AND BEHAVIOR
Labor Supply
Theoretical Considerations
Some Caveats
Labor Supply and Tax Revenues
Overview
Saving
Tax-Preferred Savings Accounts
Taxes and the Capital Shortage
Housing Decisions
Proposals for Change
Portfolio Composition
A Note on Politics and Elasticities
Summary
Discussion Questions
CHAPTER 19
THE CORPORATION TAX
Why Tax Corporations?
Structure
Employee Compensation Deducted
Interest, but Not Dividends, Deducted
Depreciation Deducted
No Investment Tax Credit
Treatment of Dividends versus Retained Earnings
Efficient Tax Rate on Corporate Capital <<AU: ?Efficient? OK or
?Effective? as
in previous edition?>>
Incidence and Excess Burden
A Tax on Corporate Capital
A Tax on Economic Profits
Effects on Behavior
Total Physical Investment
Types of Asset
Corporate Finance
State Corporation Taxes
Taxation of Multinational Corporations
Evaluation
Corporation Tax Reform
Full Integration
Dividend Relief
Summary
Discussion Questions
CHAPTER 20
DEFICIT FINANCE
How Big Is the Debt?
Interpreting Deficit, Surplus, and Debt Numbers
Summing Up
The Burden of the Debt
Lerner?s View
An Overlapping Generations Model
Neoclassical Model
Ricardian Model
Overview
To Tax or to Borrow?
Benefits-Received Principle
Intergenerational Equity
Efficiency Considerations
Macroeconomic Considerations
Moral and Political Considerations
Overview
Summary
Discussion Questions
CHAPTER 21
FUNDAMENTAL TAX REFORM: TAXES ON CONSUMPTION AND WEALTH
Efficiency and Equity of Personal Consumption Taxes
Efficiency Issues
Equity Issues
Retail Sales Tax
Rationalizations
Efficiency and Distributional Implications of State Sales Taxes
A National Retail Sales Tax <<AU: Head here OK or add question mark at
end
as in previous edition?>>
Value-Added Tax
Implementation Issues
A VAT for the Untied States?
Hall-Rabushka Flat Tax
Cash-Flow Tax
Income versus Consumption Taxation
Advantages of a Consumption Tax
Disadvantages of a Consumption Tax
Problems with Both Systems
Wealth Taxes
Why Tax Wealth?
Estate and Gift Taxes
Rationales
Provisions
Reforming Estate and Gift Taxes
Prospects for Fundamental Tax Reform
Summary
Discussion Questions
PART 6
MULTIGOVERNMENT PUBLIC FINANCE
CHAPTER 22
PUBLIC FINANCE IN A FEDERAL SYSTEM
Background
Community Formation
The Teibout Model
Tiebout?s Assumptions
Tiebout and the Real World
Optimal Federalism
Disadvantages of a Decentralized System
Advantages of a Decentralized System
Implications
Public Education in a Federal System
Property Tax
Incidence and Efficiency Effects
Why Do People Hate the Property Tax So Much?
Intergovernmental Grants
Types of Grants
The Flypaper Effect
Intergovernmental Grants for Education
Overview
Summary
Discussion Questions
APPENDIX
GLOSSARY
REFERENCES
AUTHOR INDEX
SUBJECT INDEX