Public Finance

Description

Public Finance is an approachable text designed with students in mind. The 13 chapters are intentionally written to be taught easily in one semester without skipping material or losing any information. Public Finance contains all the necessary tools and core chapters that are integral to any Public Finance course in a clear and easy-to-read format. The concise sections and lucid examples are engaging for students, without being dense or tedious. This First Edition text incorporates research from across the discipline and provides empirical tie-ins to the real world. The author also covers special topic chapters that define public finance, like education, social security, and healthcare. Title Table of Contents 1 Introduction to Public Finance The Role of Government in Making a Free Market Possible Why the Free Market Usually Works Well for Consumers Taxes, Subsidies, Regulations, and Inefficiency Problems for the Free Market Externalities: Chapters 2 and 6 Public Goods: Chapter 3 Social Insurance: Chapters 5 and 6 Income Distribution, Taxation, and Efficiency: Chapters 7, 8, and 9 Education: Chapter 11 Low-Income Assistance: Chapter 12 Problems for the Government Political Economy: Chapter 3 Cost-Benefit Analysis: Chapter 4 Which Level of Government? Chapter 10 Borrowing Instead of Taxing: Chapter 13 Taxes and Government Spending in the United States Summary Key Terms Questions Appendix: The Indifference-Curve/Budget-Line Diagram 2 Externalities and the Environment The Economist’s Approach to Pollution Environmental Pollution Coase’s Prescription When Victims Are Few: Assign a Property Right The Trade-Off between Environmental Quality and Output The Virtues of Pollution Prices Objections to Pollution Prices and Economists’ Responses Charging a Price versus Mandating or Subsidizing Clean Technologies Economic Analysis of a Pollution Tax and Tradable Permits A Pollution Tax Tradable Permits Applications: Acid Rain and Global Warming Tradable Permits for Sulfur Dioxide to Reduce Acid Rain A Carbon Tax or Tradable Permits to Reduce Global Warming Box—Case Study: A Carbon Tax versus a Carbon Cap and Trade Program Summary Key Terms Questions 3 Public Goods and Political Economy The Concept of a Public Good Nonexcludability, the Free-Rider Problem, and Taxation Who Should Produce a Public Good? The Island Wall Box—Current Research: Optimal Protection against Crime Political Economy Political Economy on the Island Box— Case Study: A Global Public Good: Military Protection of a Valuable World Resource The Behavior of Government Voting, Legislators, Policies, and Elections Box—Why Does an Individual Citizen Vote? Logrolling Lobbying, Special Interests, Campaigns, Bureaucracies, and Corruption Box—Case Study : The Politics of Subsidies and Tariffs Public Choice, Government Failure, and Constitutions Summary Key Terms Questions 4 Cost-Benefit Analysis Cost-Benefit Analysis A Private Firm Building a Factory Government Building a Highway Benefits of Improving the Safety of a Highway Box—In the News: The 2007 Minneapolis Interstate Highway Bridge Collapse The Value of a Statistical Life Mistakes to Avoid Reducing Global Warming Uncertainty and the Risk of Catastrophe The Social Discount Rate Cost-Effectiveness Analysis Box—Current Research: The Debate over the 2006 Stern Review on Global Warming Paying for a Costly Medical Treatment Intervening Militarily Box—Case Study: The 2003 U.S. Military Intervention in Iraq Summary Key Terms Questions 5 Social Security Four Ways to Prepare for Retirement Workers Support Retirees Each Generation Self-Sufficient The Rate of Return Box—The Derivation of r * = g L + gW + gL g W When Workers Support Retirees The Impact on the Economy Breaking Out Is Hard to Do Defined Benefit versus Defined Contribution The U.S. Social Security System Background Description of the Current U.S. Social Security Program The Impact on Work The Impact on Saving, Investment, and Capital Accumulation The Impact on Retirement Reforming Social Security Treating the 2040 Problem Box—Case Study: The Clash of Two Distinguished Economists over Social Security Making Each Generation Self-Sufficient Collective Self-Sufficiency Individual Self-Sufficiency: Individual Investment Accounts Combinations and Compromises Box—In the News: The Bush Administration’s Social Security Proposal Summary Key Terms Questions Appendix: Social Security 6 Health Insurance Health Insurance in the United States Principles of Health Insurance The Genesis of Health Insurance Starting a Health Insurance Company Moral Hazard and Price Responsiveness Adverse Selection and Asymmetric Information Catastrophic Insurance X % Insurance The Impact of Insurance on Efficiency and Redistribution Limitation of Price and Supply by the Insurer Features of the Health Insurance Markets Patients, Doctors, and the Principal-Agent Problem Regulation by Insurers Employer-Provided Health Insurance Who Bears the Burden of Employer-Provided Health Insurance? Rising Medical Expenditures The Role of Government Medicaid and the State Children’s Health Insurance Program Alternative Public Policies for Working Families Medicare for Retirees Box—Current Research: Should Some Medical Care Be Rationed? Health Insurance in Other Countries: An International Perspective Summary Key Terms Questions Appendix: Health Insurance 7 Tax Incidence and Inefficiency Incidence: Who Bears the Burden People, Not Firms, Ultimately Bear All Tax Burdens The Distribution of the Burden Depends on the Relative Elasticities The Distribution of the Burden Doesn’t Depend on Who Writes the Check A Tax on Wage Income A Tax on Capital Income General Equilibrium Tax Incidence Inefficiency The Efficiency Loss from a Tax on a Good Optimal Commodity Taxation The Efficiency Loss from a Tax on Wage Income The Efficiency Loss from a Tax on Capital Income A Lump-Sum Tax and the Marginal Tax Rate The Revenue-Rate Curve Summary Key Terms Questions Appendix: Tax Incidence and Inefficiency 8 Income Taxes Mechanics of the U.S. Income Tax Determining Your Income Tax The Alternative Minimum Tax Box—Case Study: A Brief History of the Top Income Tax Rate Different Tax Schedules for Married Couples and Single Persons Concepts Underlying the Income Tax Ability to Pay Proportional, Progressive, Regressive Comprehensive Income Credits versus Deductions Should a Deduction or Credit Have a Ceiling or a Floor? Particular Deductions, Exemptions, and Credits Issues in Taxing Capital Income Retirement Saving Incentives Capital Gains Business Income The Corporate Income Tax The Estate Tax Issues in Taxing Labor Income Household Taxation, Progressivity, and the Second Earner A Labor Income Tax The Payroll Tax Summary Key Terms Questions 9 Consumption Taxes A Retail Sales Tax A Value-Added Tax A Subtraction VAT Comparing a VAT to a RST Exemptions under a RST or a VAT A Household Rebate with a RST or a VAT The Flat Tax and the X Tax A Household Consumption Tax History of a Household Consumption Tax Computing Household Consumption A Progressive Consumption Tax on Very High Consumption Replacing the Income Tax with a Consumption Tax Impact on Saving Impact on Efficiency Loss Impact on the Distribution of the Tax Burden A Consumption Tax versus a Labor Income Tax Similarities Differences Which Tax is Fairest? Regressivity Taxing What You Take versus Taxing What You Make The Grasshopper and the Ants Pollution Taxes Transportation Taxes Health Taxes Summary Key Terms Questions 10 State and Local Public Finance Optimal Federalism When Household Incomes are Similar The Tiebout Process State Government for Local Externalities or Scale Economies Optimal Federalism When Household Incomes Differ Residential Location When Incomes Differ: The Separation Process Should a City Government Try to Tax Suburbanites? Should a City Tax Economic Activity That Occurs within the City? Should a City Set a High Tax Rate on Affluent Residents? The Role of State Government When People Separate by Income Box—Case Study: Should Suburbs Help Their Central City? The Property Tax The Mechanics of the Property Tax The Distribution of a Residential Property Tax across Households Who Bears the Burden of a Residential Property Tax? Do Renters of Housing Bear a Burden from the Property Tax? The Burden of a Property Tax on Land The Burden of a Property Tax on Business Firms Arguments for the Residential Property Tax for Local Governments Criticisms of the Residential Property Tax for Local Governments Grants from a Higher Government to Lower Governments Purposes of Grants Different Grants for Different Purposes Summary Key Terms Questions Appendix: State and Local Public Finance 11 Education What Schools Do Elementary and Secondary Education Private Schools without Government Private Schools with Vouchers from Government Public Schools Public Schools plus a Refundable Tax Credit for Private School Tuition Tuition versus Taxes The Public-Private School Tuition Gap The Optimal Quality of a Public School State Funding of Public Schools State versus Local Funding of Public Schools Improving Public Schools Higher Education The Costs and Benefits of Higher Education Private Colleges without Government Public Colleges with Tuition below Cost Student Loans and Financial Aid Box—Case Study: College Grants on a Postcard Summary Key Terms Questions Appendix: Education 12 Low-Income Assistance Federal Spending to Assist Low-Income People Unrestricted versus Restricted Assistance Medicaid The Earned Income Tax Credit Welfare The Impact of Assistance on Poverty Refundable Tax Credits Unemployment Insurance Summary Key Terms Questions Appendix: Low-Income Assistance 13 Government Borrowing Government Debt Deficit versus Debt Commonsense Concern about Excessive Borrowing The Burden of the Debt Investment Capital Expenditures Government Borrowing, Interest Rates, and the Crowding Out of Investment Balanced Budget Disciplining Politicians with a Balanced Budget Rule Box—Case Study: The Deficit and Interest Rates: An Estimate from U.S. Data The Problem with an Always Balanced Budget Rule A Normal Unemployment Balanced Budget Rule Future Considerations Fiscal Imbalance Generational Accounting Deficits, Debt, and Interest U.S. Deficits, Debt, and Interest during the Past Half Century Box—Deficits and Debt with Two Components of Government The Deficit, Debt, and Interest as a Percentage of GDP Inflation, Debt, and Deficits The Long-Term Budget Outlook for the U.S. Box—In the News: Is Medical Care the Primary Cause of the Long-Term Budget Problem? Summary Key Terms Questions Appendix: Government Borrowing Glossary Index