| Preface |
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xvii | |
| Part I Introduction and Background |
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Chapter 1 Why Study Public Finance? |
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1 | (26) |
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1.1 The Four Questions of Public Finance |
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3 | (8) |
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When Should the Government Intervene in the Economy? |
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4 | (4) |
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Application: Modern Measles Epidemics |
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5 | (3) |
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How Might the Government Intervene? |
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8 | (1) |
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What Are the Effects of Alternative Interventions? |
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9 | (2) |
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Application: The CBO: Government Scorekeepers |
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10 | (1) |
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Why Do Governments Do What They Do? |
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11 | (1) |
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1.2 Why Study Public Finance? Facts on Government in the United States and Around the World |
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11 | (10) |
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The Size and Growth of Government |
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12 | (1) |
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13 | (1) |
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Spending, Taxes, Deficits, and Debts |
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14 | (2) |
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16 | (3) |
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Distribution of Revenue Sources |
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19 | (1) |
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Regulatory Role of the Government |
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19 | (2) |
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1.3 Why Study Public Finance Now? Policy Debates over Social Security, Health Care, and Education |
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21 | (3) |
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21 | (1) |
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22 | (1) |
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23 | (1) |
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24 | (3) |
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24 | (1) |
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25 | (1) |
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25 | (2) |
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Chapter 2 Theoretical Tools of Public Finance |
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27 | (38) |
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2.1 Constrained Utility Maximization |
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28 | (11) |
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Preferences and Indifference Curves |
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29 | (2) |
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Utility Mapping of Preferences |
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31 | (2) |
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33 | (2) |
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Putting It All Together: Constrained Choice |
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35 | (2) |
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The Effects of Price Changes: Substitution and Income Effects |
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37 | (2) |
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2.2 Putting the Tools to Work: TANF and Labor Supply Among Single Mothers |
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39 | (6) |
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Identifying the Budget Constraint |
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40 | (1) |
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The Effect of TANF on the Budget Constraint |
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41 | (4) |
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2.3 Equilibrium and Social Welfare |
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45 | (11) |
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46 | (2) |
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48 | (1) |
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49 | (1) |
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50 | (3) |
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Competitive Equilibrium Maximizes Social Efficiency |
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53 | (1) |
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From Social Efficiency to Social Welfare: The Role of Equity |
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54 | (2) |
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Choosing an Equity Criterion |
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56 | (1) |
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2.4 Welfare Implications of Benefit Reductions: The TANF Example Continued |
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56 | (2) |
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58 | (4) |
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59 | (1) |
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59 | (1) |
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60 | (2) |
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Appendix: The Mathematics of Utility Maximization |
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62 | (3) |
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Chapter 3 Empirical Tools of Public Finance |
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65 | (28) |
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3.1 The Important Distinction Between Correlation and Causality |
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66 | (2) |
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67 | (1) |
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3.2 Measuring Causation with Data We'd Like to Have: Randomized Trials |
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68 | (5) |
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Randomized Trials as a Solution |
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69 | (1) |
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70 | (1) |
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71 | (1) |
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Randomized Trials in the TANF Context |
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71 | (1) |
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Why We Need to Go Beyond Randomized Trials |
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72 | (1) |
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3.3 Estimating Causation with Data We Actually Get: Observational Data |
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73 | (13) |
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73 | (4) |
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Cross-Sectional Regression Analysis |
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77 | (4) |
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81 | (4) |
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85 | (1) |
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86 | (3) |
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87 | (1) |
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87 | (1) |
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88 | (1) |
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Appendix: Cross-Sectional Regression Analysis |
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89 | (4) |
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Chapter 4 Budget Analysis and Deficit Financing |
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93 | (30) |
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95 | (6) |
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The Budget Deficit in Recent Years |
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95 | (2) |
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97 | (3) |
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Application: Efforts to Control the Deficit |
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98 | (2) |
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Budget Policies and Deficits at the State Level |
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100 | (1) |
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4.2 Measuring the Budgetary Position of the Government: Alternative Approaches |
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101 | (5) |
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101 | (1) |
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102 | (1) |
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Cash Versus Capital Accounting |
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103 | (2) |
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Static Versus Dynamic Scoring |
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105 | (1) |
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4.3 Do Current Debts and Deficits Mean Anything? A Long-Run Perspective |
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106 | (8) |
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Background: Present Discounted Value |
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107 | (1) |
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Application: Present Discounted Value and Interpreting Sports Contracts |
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107 | (1) |
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Why Current Labels May Be Meaningless |
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108 | (1) |
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Measuring Long-Run Government Budgets |
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109 | (2) |
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What Does the U.S. Government Do? |
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111 | (3) |
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Application: The Financial Shenanigans of 2001 |
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113 | (1) |
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4.4 Why Do We Care About the Government's Fiscal Position? |
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114 | (6) |
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Short-Run Versus Long-Run Effects of the Government on the Macroeconomy |
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115 | (1) |
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Background: Savings and Economic Growth |
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115 | (2) |
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The Federal Budget, Interest Rates, and Economic Growth |
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117 | (2) |
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119 | (1) |
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120 | (3) |
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120 | (1) |
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121 | (1) |
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121 | (2) |
| Part II Externalities and Public Goods |
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Chapter 5 Externalities: Problems and Solutions |
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123 | (30) |
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125 | (7) |
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Economics of Negative Production Externalities |
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125 | (3) |
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Negative Consumption Externalities |
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128 | (2) |
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Application: The Externality of SUVs |
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129 | (1) |
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130 | (2) |
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5.2 Private-Sector Solutions to Negative Externalities |
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132 | (4) |
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132 | (2) |
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The Problems with Coasian Solutions |
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134 | (2) |
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5.3 Public-Sector Remedies for Externalities |
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136 | (3) |
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136 | (1) |
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137 | (2) |
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139 | (1) |
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5.4 Distinctions Between Price and Quantity Approaches to Addressing Externalities |
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139 | (9) |
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140 | (1) |
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Price Regulation (Taxes) Versus Quantity Regulation in This Model |
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141 | (1) |
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Multiple Plants with Different Reduction Costs |
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142 | (3) |
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Uncertainty About Costs of Reduction |
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145 | (3) |
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148 | (5) |
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148 | (1) |
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149 | (1) |
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150 | (3) |
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Chapter 6 Externalities in Action: Environmental and Health Externalities |
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153 | (38) |
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6.1 The Role of Economics in Environmental Regulation: The Case of Acid Rain |
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155 | (6) |
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156 | (1) |
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History of Acid Rain Regulation |
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157 | (3) |
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Empirical Evidence: Estimating the Adverse Health Effects of Particulates |
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158 | (2) |
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Has the CAA Been a Success? |
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160 | (1) |
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161 | (10) |
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Application: The Montreal Protocol |
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163 | (1) |
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164 | (1) |
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Can Trading Make Environmental Agreements More Cost-Effective? |
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164 | (3) |
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What Does the Future Hold? |
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167 | (4) |
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Application: Congress Takes on Global Warming |
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169 | (2) |
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6.3 The Economics of Smoking |
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171 | (9) |
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The Externalities of Smoking |
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173 | (3) |
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Should We Care Only About Externalities, or Do "Internalities" Matter Also? |
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176 | (4) |
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6.4 The Economics of Other Addictive Behaviors |
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180 | (8) |
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180 | (1) |
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181 | (6) |
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Empirical Evidence: The Effect of Legal Drinking at Age 21 |
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182 | (2) |
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Application: Public Policy Toward Obesity |
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184 | (3) |
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187 | (1) |
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188 | (3) |
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188 | (1) |
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188 | (1) |
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189 | (2) |
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191 | (28) |
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7.1 Optimal Provision of Public Goods |
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192 | (5) |
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Optimal Provision of Private Goods |
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193 | (2) |
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Optimal Provision of Public Goods |
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195 | (2) |
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7.2 Private Provision of Public Goods |
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197 | (7) |
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Private-Sector Underprovision |
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198 | (2) |
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Application: The Free Rider Problem in Practice |
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199 | (1) |
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Can Private Providers Overcome the Free Rider Problem? |
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200 | (1) |
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Application: Business Improvement Districts |
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200 | (1) |
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When Is Private Provision Likely to Overcome the Free Rider Problem? |
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201 | (3) |
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7.3 Public Provision of Public Goods |
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204 | (8) |
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Private Responses to Public Provision: The Problem of Crowd-Out |
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205 | (3) |
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Empirical Evidence: Measuring Crowd-Out |
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206 | (2) |
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The Right Mix of Public and Private |
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208 | (3) |
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Application: The Good and Bad Sides of Contracting Out |
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208 | (3) |
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Measuring the Costs and Benefits of Public Goods |
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211 | (1) |
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How Can We Measure Preferences for Public Goods? |
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211 | (1) |
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212 | (3) |
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212 | (1) |
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213 | (1) |
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213 | (2) |
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Appendix: The Mathematics of Public Goods Provision |
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215 | (4) |
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Chapter 8 Cost-Benefit Analysis |
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219 | (22) |
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8.1 Measuring the Costs of Public Projects |
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220 | (4) |
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221 | (1) |
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221 | (3) |
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8.2 Measuring the Benefits of Public Projects |
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224 | (11) |
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Valuing Driving Time Saved |
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224 | (3) |
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Application: The Problems of Contingent Valuation |
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226 | (1) |
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227 | (7) |
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Empirical Evidence: Valuing Time Savings |
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228 | (1) |
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Application: Valuing Life |
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229 | (5) |
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Empirical Evidence: How Much Does It Cost to Avoid a Traffic Fatality? |
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234 | (1) |
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Discounting Future Benefits |
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234 | (1) |
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Cost-Effectiveness Analysis |
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235 | (1) |
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8.3 Putting It All Together |
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235 | (2) |
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Other Issues in Cost-Benefit Analysis |
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236 | (1) |
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237 | (4) |
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238 | (1) |
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238 | (1) |
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239 | (2) |
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Chapter 9 Political Economy |
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241 | (34) |
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9.1 Unanimous Consent on Public Goods Levels |
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243 | (3) |
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243 | (2) |
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Problems with Lindahl Pricing |
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245 | (1) |
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9.2 Mechanisms for Aggregating Individual Preferences |
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246 | (9) |
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Application: Direct Democracy in the United States |
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246 | (2) |
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Majority Voting: When It Works |
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248 | (2) |
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Majority Voting: When It Doesn't Work |
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250 | (1) |
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Arrow's Impossibility Theorem |
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251 | (1) |
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Restricting Preferences to Solve the Impossibility Problem |
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251 | (2) |
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253 | (1) |
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The Potential Inefficiency of the Median Voter Outcome |
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253 | (1) |
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254 | (1) |
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9.3 Representative Democracy |
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255 | (9) |
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Vote-Maximizing Politicians Represent the Median Voter |
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255 | (1) |
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Assumptions of the Median Voter Model |
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256 | (2) |
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258 | (3) |
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Application: Farm Policy in the United States |
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259 | (2) |
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Evidence on the Median Voter Model for Representative Democracy |
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261 | (3) |
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Empirical Evidence: Testing the Median Voter Model |
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262 | (2) |
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9.4 Public Choice Theory: The Foundations of Government Failure |
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264 | (5) |
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Size-Maximizing Bureaucracy |
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265 | (1) |
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265 | (1) |
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266 | (3) |
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Application: Government Corruption |
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266 | (3) |
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The Implications of Government Failure |
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269 | (1) |
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269 | (6) |
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Empirical Evidence: Government Failures and Economic Growth |
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270 | (1) |
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271 | (1) |
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272 | (1) |
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273 | (2) |
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Chapter 10 State and Local Government Expenditures |
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275 | (30) |
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10.1 Fiscal Federalism in the United States and Abroad |
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277 | (4) |
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Spending and Revenue of State and Local Governments |
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279 | (1) |
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280 | (1) |
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10.2 Optimal Fiscal Federalism |
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281 | (9) |
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281 | (2) |
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Problems with the Tiebout Model |
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283 | (3) |
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Evidence on the Tiebout Model |
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286 | (1) |
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Optimal Fiscal Federalism |
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287 | (3) |
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Empirical Evidence: Evidence for Capitalization from California's Proposition 13 |
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288 | (2) |
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10.3 Redistribution Across Communities |
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290 | (10) |
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290 | (1) |
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Tools of Redistribution: Grants |
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291 | (5) |
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Redistribution in Action: School Finance Equalization |
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296 | (4) |
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Empirical Evidence: The Flypaper Effect |
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298 | (1) |
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Application: School Finance Equalization and Property Tax Limitations in California |
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299 | (1) |
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300 | (5) |
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300 | (1) |
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301 | (1) |
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302 | (3) |
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305 | (30) |
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11.1 Why Should the Government Be Involved in Education? |
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308 | (2) |
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308 | (1) |
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309 | (1) |
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309 | (1) |
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Failure to Maximize Family Utility |
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310 | (1) |
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310 | (1) |
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11.2 How Is the Government Involved in Education? |
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310 | (10) |
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Free Public Education and Crowding Out |
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311 | (2) |
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Solving the Crowd-Out Problem: Vouchers |
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313 | (2) |
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Problems with Educational Vouchers |
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315 | (5) |
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11.3 Evidence on Competition in Education Markets |
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320 | (3) |
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Direct Experience with Vouchers |
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320 | (1) |
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Experience with Public School Choice |
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320 | (2) |
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Empirical Evidence: Estimating the Effects of Voucher Programs |
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221 | (101) |
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Experience with Public School Incentives |
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322 | (1) |
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Bottom Line on Vouchers and School Choice |
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323 | (1) |
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11.4 Measuring the Returns to Education |
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323 | (4) |
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Effects of Education Levels on Productivity |
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323 | (2) |
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Effect of Education Levels on Other Outcomes |
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325 | (1) |
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The Impact of School Quality |
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325 | (2) |
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Empirical Evidence: Estimating the Return to Education |
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326 | (1) |
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11.5 The Role of the Government in Higher Education |
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327 | (4) |
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Empirical Evidence: Estimating the Effects of School Quality |
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328 | (1) |
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328 | (2) |
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What Is the Market Failure, and How Should It Be Addressed? |
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330 | (1) |
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331 | (4) |
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332 | (1) |
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332 | (1) |
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333 | (2) |
| Part III Social Insurance and Redistribution |
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Chapter 12 Social Insurance: The New Function of Government |
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335 | (32) |
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12.1 What Is Insurance and Why Do Individuals Value It? |
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337 | (5) |
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338 | (1) |
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Why Do Individuals Value Insurance? |
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338 | (1) |
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Formalizing This Intuition: Expected Utility Model |
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339 | (3) |
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12.2 Why Have Social Insurance? Asymmetric Information and Adverse Selection |
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342 | (7) |
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342 | (1) |
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Example with Full Information |
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343 | (1) |
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Example with Asymmetric Information |
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344 | (1) |
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The Problem of Adverse Selection |
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345 | (1) |
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Does Asymmetric Information Necessarily Lead to Market Failure? |
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346 | (2) |
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Application: Adverse Selection and Health Insurance "Death Spirals" |
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347 | (1) |
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How Does the Government Address Adverse Selection? |
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348 | (1) |
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12.3 Other Reasons for Government Intervention in Insurance Markets |
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349 | (3) |
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349 | (1) |
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349 | (1) |
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349 | (1) |
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350 | (2) |
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Application: Flood Insurance and the Samaritan's Dilemma |
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350 | (2) |
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12.4 Social Insurance Versus Self-Insurance: How Much Consumption Smoothing? |
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352 | (3) |
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Example: Unemployment Insurance |
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353 | (2) |
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Lessons for Consumption-Smoothing Role of Social Insurance |
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355 | (1) |
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12.5 The Problem with Insurance: Moral Hazard |
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355 | (4) |
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Application: The Problems with Assessing Workers' Compensation Injuries |
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356 | (1) |
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What Determines Moral Hazard? |
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357 | (1) |
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Moral Hazard Is Multidimensional |
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358 | (1) |
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The Consequences of Moral Hazard |
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358 | (1) |
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12.6 Putting It All Together: Optimal Social Insurance |
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359 | (1) |
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360 | (4) |
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361 | (1) |
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361 | (1) |
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362 | (2) |
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Appendix: Mathematical Models of Expected Utility |
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364 | (3) |
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Chapter 13 Social Security |
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367 | (36) |
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13.1 What Is Social Security, and How Does It Work? |
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369 | (10) |
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369 | (4) |
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Application: Why Choose 35 Years? |
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371 | (2) |
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How Does Social Security Work over Time? |
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373 | (3) |
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Application: Ida May Fuller |
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375 | (1) |
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How Does Social Security Redistribute in Practice? |
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376 | (3) |
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13.2 Consumption-Smoothing Benefits of Social Security |
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379 | (4) |
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Rationales for Social Security |
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379 | (1) |
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Does Social Security Smooth Consumption? |
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380 | (1) |
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Social Security and Private Savings |
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381 | (1) |
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Living Standards of the Elderly |
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381 | (2) |
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Empirical Evidence: Measuring the Crowd-Out Effect of Social Security on Savings |
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382 | (1) |
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13.3 Social Security and Retirement |
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383 | (6) |
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383 | (1) |
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384 | (5) |
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Application: Implicit Social Security Taxes and Retirement Behavior |
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387 | (2) |
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389 | (1) |
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13.4 Social Security Reform |
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389 | (11) |
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Reform Round I: The Greenspan Commission |
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390 | (1) |
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Application: The Social Security Trust Fund and National Savings |
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391 | (1) |
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391 | (4) |
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Fundamental Reform: Privatization |
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395 | (5) |
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Application: Company Stock in 401(k) Plans |
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397 | (2) |
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Application: Mixed Proposals for Social Security Reform |
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399 | (1) |
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400 | (3) |
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400 | (1) |
|
|
|
400 | (1) |
|
|
|
401 | (2) |
|
Chapter 14 Unemployment Insurance, Disability Insurance, and Workers' Compensation |
|
|
403 | (30) |
|
14.1 Institutional Features of Unemployment Insurance, Disability Insurance, and Workers' Compensation |
|
|
405 | (7) |
|
Institutional Features of Unemployment Insurance |
|
|
405 | (2) |
|
Institutional Features of Disability Insurance |
|
|
407 | (1) |
|
Institutional Features of Workers' Compensation |
|
|
408 | (2) |
|
Comparison of the Features of UI, DI, and WC |
|
|
410 | (3) |
|
Application: The Duration of Social Insurance Benefits Around the World |
|
|
410 | (2) |
|
14.2 Consumption-Smoothing Benefits of Social Insurance Programs |
|
|
412 | (1) |
|
14.3 Moral Hazard Effects of Social Insurance Programs |
|
|
413 | (8) |
|
Moral Hazard Effects of Unemployment Insurance |
|
|
413 | (3) |
|
Empirical Evidence: Moral Hazard Effects of Unemployment Insurance |
|
|
414 | (2) |
|
Evidence for Moral Hazard in DI |
|
|
416 | (4) |
|
Empirical Evidence: Disability Insurance Screening and Labor Supply |
|
|
418 | (2) |
|
Evidence for Moral Hazard in WC |
|
|
420 | (1) |
|
Empirical Evidence: Moral Hazard Effects of Workers' Compensation |
|
|
421 | (1) |
|
14.4 The Costs and Benefits of Social Insurance to Firms |
|
|
421 | (4) |
|
The Effects of Partial Experience Rating in UI on Layoffs |
|
|
422 | (1) |
|
The "Benefits" of Partial Experience Rating |
|
|
423 | (2) |
|
Application: The "Cash Cow" of Partial Experience Rating |
|
|
424 | (1) |
|
Workers' Compensation and Firms |
|
|
425 | (1) |
|
14.5 Implications for Program Reform |
|
|
425 | (3) |
|
|
|
425 | (1) |
|
|
|
426 | (1) |
|
|
|
427 | (1) |
|
|
|
427 | (1) |
|
Application: Reforming UI |
|
|
427 | (1) |
|
|
|
428 | (3) |
|
|
|
429 | (1) |
|
|
|
429 | (1) |
|
|
|
430 | (1) |
|
Appendix: Advanced Quasi-Experimental Analysis |
|
|
431 | (2) |
|
Chapter 15 Health Insurance I: Health Economics and Private Health Insurance |
|
|
433 | (38) |
|
15.1 An Overview of Health Care in the United States |
|
|
435 | (15) |
|
Application: Finding the Inefficiency in U.S. Health Care |
|
|
437 | (4) |
|
How Health Insurance Works: The Basics |
|
|
441 | (1) |
|
|
|
442 | (4) |
|
|
|
446 | (1) |
|
|
|
446 | (1) |
|
|
|
447 | (1) |
|
|
|
447 | (3) |
|
Empirical Evidence: Health Insurance and Mobility |
|
|
450 | (1) |
|
15.2 How Generous Should Insurance Be to Patients? |
|
|
450 | (13) |
|
Consumption-Smoothing Benefits of Health Insurance for Patients |
|
|
451 | (1) |
|
Moral Hazard Costs of Health Insurance for Patients |
|
|
452 | (3) |
|
How Elastic Is the Demand for Medical Care? The RAND Health Insurance Experiment |
|
|
455 | (3) |
|
Empirical Evidence: Estimating the Elasticity of Demand for Medical Care |
|
|
456 | (2) |
|
|
|
458 | (1) |
|
Why Is Insurance So Generous in the United States? |
|
|
459 | (4) |
|
Application: Health Savings Accounts |
|
|
460 | (3) |
|
15.3 How Generous Should Insurance Be to Medical Providers? |
|
|
463 | (3) |
|
Managed Care and Prospective Reimbursement |
|
|
463 | (2) |
|
The Impacts of Managed Care |
|
|
465 | (1) |
|
How Should Providers Be Reimbursed? |
|
|
466 | (1) |
|
|
|
466 | (5) |
|
|
|
467 | (1) |
|
|
|
467 | (1) |
|
|
|
468 | (3) |
|
Chapter 16 Health Insurance II: Medicare, Medicaid, and Health Care Reform |
|
|
471 | (40) |
|
16.1 The Medicaid Program for Low-Income Families |
|
|
473 | (2) |
|
|
|
473 | (1) |
|
Who Is Eligible for Medicaid? |
|
|
473 | (1) |
|
What Health Services Does Medicaid Cover? |
|
|
474 | (1) |
|
How Do Providers Get Paid? |
|
|
475 | (1) |
|
16.2 What Are the Benefits of the Medicaid Program? |
|
|
475 | (5) |
|
Does Medicaid Provide Financial Protection? |
|
|
475 | (1) |
|
Does Medicaid Improve Health? |
|
|
476 | (1) |
|
How Does Medicaid Affect Health? Evidence |
|
|
477 | (3) |
|
Empirical Evidence: Using State Medicaid Expansions to Estimate Program Effects |
|
|
479 | (1) |
|
16.3 The Medicare Program |
|
|
480 | (4) |
|
|
|
480 | (4) |
|
Application: The Medicare Prescription Drug Debate |
|
|
482 | (2) |
|
16.4 What Are the Effects of the Medicare Program? |
|
|
484 | (11) |
|
The Prospective Payment System |
|
|
485 | (1) |
|
Empirical Evidence: On the Move to the PPS |
|
|
485 | (1) |
|
|
|
486 | (2) |
|
Empirical Evidence: Short Stays in Long-Term Care Hospitals |
|
|
488 | (1) |
|
Lesson: The Difficulty of Partial Reform |
|
|
488 | (2) |
|
|
|
490 | (2) |
|
Should Medicare Move to a Full Choice Plan? Premium Support |
|
|
492 | (3) |
|
Application: A Premium Support System for Medicare |
|
|
493 | (2) |
|
Gaps in Medicare Coverage |
|
|
495 | (1) |
|
|
|
495 | (2) |
|
|
|
496 | (1) |
|
16.6 Health Care Reform in the United States |
|
|
497 | (9) |
|
|
|
497 | (2) |
|
The Massachusetts Experiment with Incremental Universalism |
|
|
499 | (1) |
|
|
|
500 | (5) |
|
Application: Rising Health Care Costs and Cost Control Efforts in the ACA |
|
|
502 | (3) |
|
Projected Impacts of the ACA and Early Evidence on Its Effects |
|
|
505 | (1) |
|
|
|
506 | (5) |
|
|
|
507 | (1) |
|
|
|
507 | (1) |
|
|
|
508 | (3) |
|
Chapter 17 Income Distribution and Welfare Programs |
|
|
511 | (38) |
|
17.1 Facts on Income Distribution in the United States |
|
|
514 | (6) |
|
Relative Income Inequality |
|
|
514 | (2) |
|
Absolute Deprivation and Poverty Rates |
|
|
516 | (3) |
|
Application: Problems in Poverty Line Measurement |
|
|
518 | (1) |
|
What Matters-Relative or Absolute Deprivation? |
|
|
519 | (1) |
|
17.2 Welfare Policy in the United States |
|
|
520 | (3) |
|
|
|
521 | (1) |
|
|
|
522 | (1) |
|
17.3 The Moral Hazard Costs of Welfare Policy |
|
|
523 | (6) |
|
Moral Hazard Effects of a Means-Tested Transfer System |
|
|
524 | (3) |
|
Solving Moral Hazard by Lowering the Benefit Reduction Rate |
|
|
527 | (1) |
|
The "Iron Triangle" of Redistributive Programs |
|
|
528 | (1) |
|
17.4 Reducing the Moral Hazard of Welfare |
|
|
529 | (15) |
|
Moving to Categorical Welfare Payments |
|
|
529 | (3) |
|
Using "Ordeal Mechanisms" |
|
|
532 | (2) |
|
Application: An Example of Ordeal Mechanisms |
|
|
534 | (1) |
|
Increasing Outside Options |
|
|
534 | (10) |
|
Empirical Evidence: The Canadian Self-Sufficiency Project |
|
|
537 | (1) |
|
Empirical Evidence: Child Care, Preschool, and Child Outcomes |
|
|
538 | (3) |
|
Application: Evaluating the 1996 Welfare Reform |
|
|
541 | (3) |
|
|
|
544 | (5) |
|
|
|
545 | (1) |
|
|
|
545 | (1) |
|
|
|
546 | (3) |
| Part IV Taxation in Theory and Practice |
|
|
Chapter 18 Taxation: How It Works and What It Means |
|
|
549 | (36) |
|
|
|
551 | (2) |
|
|
|
551 | (1) |
|
Taxes on Individual Income |
|
|
551 | (1) |
|
Taxes on Corporate Income |
|
|
551 | (1) |
|
|
|
551 | (1) |
|
|
|
552 | (1) |
|
Taxation Around the World |
|
|
552 | (1) |
|
18.2 Structure of the Individual Income Tax in the United States |
|
|
553 | (5) |
|
|
|
554 | (1) |
|
|
|
555 | (3) |
|
Application: Fixing the AMT |
|
|
557 | (1) |
|
18.3 Measuring the Fairness of Tax Systems |
|
|
558 | (4) |
|
Average and Marginal Tax Rates |
|
|
559 | (1) |
|
Vertical and Horizontal Equity |
|
|
560 | (1) |
|
Measuring Vertical Equity |
|
|
561 | (1) |
|
Application: The Political Process of Measuring Tax Fairness |
|
|
561 | (1) |
|
18.4 Defining the Income Tax Base |
|
|
562 | (4) |
|
The Haig-Simons Comprehensive Income Definition |
|
|
563 | (1) |
|
Deviations due to Ability-to-Pay Considerations |
|
|
564 | (1) |
|
Deviations due to Costs of Earning Income |
|
|
564 | (2) |
|
Application: What Are Appropriate Business Deductions? |
|
|
565 | (1) |
|
18.5 Externality/Public Goods Rationales for Deviating from Haig-Simons |
|
|
566 | (11) |
|
|
|
566 | (1) |
|
Spending Crowd-Out Versus Tax Subsidy Crowd-In |
|
|
567 | (2) |
|
Consumer Sovereignty Versus Imperfect Information |
|
|
569 | (1) |
|
|
|
570 | (3) |
|
Empirical Evidence: The Social Benefits of Homeownership |
|
|
572 | (1) |
|
Tax Deductions Versus Tax Credits |
|
|
573 | (3) |
|
Application: The Refundability Debate |
|
|
574 | (2) |
|
Bottom Line: Tax Expenditures |
|
|
576 | (1) |
|
18.6 The Appropriate Unit of Taxation |
|
|
577 | (4) |
|
The Problem of the "Marriage Tax" |
|
|
577 | (2) |
|
Marriage Taxes in Practice |
|
|
579 | (2) |
|
|
|
581 | (4) |
|
|
|
581 | (1) |
|
|
|
581 | (1) |
|
|
|
582 | (3) |
|
Chapter 19 The Equity Implications of Taxation: Tax Incidence |
|
|
585 | (34) |
|
19.1 The Three Rules of Tax Incidence |
|
|
587 | (9) |
|
The Statutory Burden of a Tax Does Not Describe Who Really Bears the Tax |
|
|
587 | (2) |
|
The Side of the Market on Which the Tax Is Imposed Is Irrelevant to the Distribution of the Tax Burdens |
|
|
589 | (3) |
|
Parties with Inelastic Supply or Demand Bear Taxes; Parties with Elastic Supply or Demand Avoid Them |
|
|
592 | (3) |
|
Reminder: Tax Incidence Is About Prices, Not Quantities |
|
|
595 | (1) |
|
19.2 Tax Incidence Extensions |
|
|
596 | (6) |
|
Tax Incidence in Factor Markets |
|
|
596 | (3) |
|
Tax Incidence in Imperfectly Competitive Markets |
|
|
599 | (2) |
|
Balanced Budget Tax Incidence |
|
|
601 | (1) |
|
19.3 General Equilibrium Tax Incidence |
|
|
602 | (5) |
|
Effects of a Restaurant Tax: A General Equilibrium Example |
|
|
602 | (3) |
|
Issues to Consider in General Equilibrium Incidence Analysis |
|
|
605 | (2) |
|
19.4 The Incidence of Taxation in the United States |
|
|
607 | (6) |
|
Empirical Evidence: The Incidence of Taxation: Real-World Complications |
|
|
608 | (1) |
|
CBOTTPC Incidence Assumptions |
|
|
608 | (2) |
|
Results of CBOTTPC Incidence Analysis |
|
|
610 | (2) |
|
Current Versus Lifetime Income Incidence |
|
|
612 | (1) |
|
|
|
613 | (3) |
|
|
|
613 | (1) |
|
|
|
614 | (1) |
|
|
|
614 | (2) |
|
Appendix: The Mathematics of Tax Incidence |
|
|
616 | (3) |
|
Chapter 20 Tax Inefficiencies and Their Implications for Optimal Taxation |
|
|
619 | (38) |
|
20.1 Taxation and Economic Efficiency |
|
|
620 | (13) |
|
|
|
620 | (2) |
|
Elasticities Determine Tax Inefficiency |
|
|
622 | (4) |
|
Empirical Evidence: The Window Tax |
|
|
623 | (3) |
|
Application: Tax Avoidance in Practice |
|
|
626 | (1) |
|
Determinants of Deadweight Loss |
|
|
626 | (2) |
|
Deadweight Loss and the Design of Efficient Tax Systems |
|
|
628 | (5) |
|
Application: The Deadweight Loss of Taxing Wireless Communications |
|
|
633 | (1) |
|
20.2 Optimal Commodity Taxation |
|
|
633 | (6) |
|
Ramsey Taxation: The Theory of Optimal Commodity Taxation |
|
|
634 | (1) |
|
|
|
635 | (1) |
|
Equity Implications of the Ramsey Model |
|
|
635 | (4) |
|
Application: Price Reform in Pakistan |
|
|
636 | (3) |
|
20.3 Optimal Income Taxes |
|
|
639 | (5) |
|
|
|
640 | (1) |
|
General Model with Behavioral Effects |
|
|
640 | (3) |
|
|
|
643 | (1) |
|
20.4 Tax-Benefit Linkages and the Financing of Social Insurance Programs |
|
|
644 | (5) |
|
|
|
644 | (3) |
|
Issues Raised by Tax-Benefit Linkage Analysis |
|
|
647 | (2) |
|
Empirical Evidence: A Group-Specific Employer Mandate |
|
|
648 | (1) |
|
|
|
649 | (3) |
|
|
|
649 | (1) |
|
|
|
649 | (1) |
|
|
|
650 | (2) |
|
Appendix: The Mathematics of Optimal Taxation |
|
|
652 | (5) |
|
Chapter 21 Taxes on Labor Supply |
|
|
657 | (26) |
|
21.1 Taxation and Labor Supply-Theory |
|
|
659 | (3) |
|
|
|
659 | (3) |
|
Limitations of the Theory: Constraints on Hours Worked and Overtime Pay Rules |
|
|
662 | (1) |
|
21.2 Taxation and Labor Supply-Evidence |
|
|
662 | (4) |
|
Limitations of Existing Studies |
|
|
663 | (3) |
|
Empirical Evidence: Estimating the Elasticity of Labor Supply |
|
|
663 | (3) |
|
21.3 Tax Policy to Promote Labor Supply: The Earned Income Tax Credit |
|
|
666 | (9) |
|
|
|
667 | (1) |
|
Impact of EITC on Labor Supply: Theory |
|
|
668 | (2) |
|
Impact of EITC on Labor Supply: Evidence |
|
|
670 | (3) |
|
Empirical Evidence: The Effect of the EITC on Single-Mother Labor Supply |
|
|
672 | (1) |
|
|
|
673 | (2) |
|
|
|
673 | (2) |
|
21.4 The Tax Treatment of Child Care and Its Impact on Labor Supply |
|
|
675 | (4) |
|
The Tax Treatment of Child Care |
|
|
675 | (3) |
|
Empirical Evidence: The Effect of Child Care Costs on Maternal Labor Supply |
|
|
676 | (2) |
|
Options for Resolving Tax Wedges |
|
|
678 | (1) |
|
|
|
678 | (1) |
|
|
|
679 | (4) |
|
|
|
680 | (1) |
|
|
|
680 | (1) |
|
|
|
681 | (2) |
|
Chapter 22 Taxes on Savings |
|
|
683 | (30) |
|
22.1 Taxation and Savings-Theory and Evidence |
|
|
685 | (7) |
|
|
|
685 | (3) |
|
Evidence: How Does the After-Tax Interest Rate Affect Savings? |
|
|
688 | (2) |
|
Inflation and the Taxation of Savings |
|
|
690 | (2) |
|
22.2 Alternative Models of Savings |
|
|
692 | (3) |
|
Precautionary Savings Models |
|
|
692 | (1) |
|
|
|
693 | (2) |
|
Empirical Evidence: Social Insurance and Personal Savings |
|
|
694 | (1) |
|
22.3 Tax Incentives for Retirement Savings |
|
|
695 | (15) |
|
Available Tax Subsidies for Retirement Savings |
|
|
695 | (2) |
|
Why Do Tax Subsidies Raise the Return to Savings? |
|
|
697 | (2) |
|
Theoretical Effects of Tax-Subsidized Retirement Savings |
|
|
699 | (6) |
|
Application: The Roth IRA |
|
|
703 | (2) |
|
Implications of Alternative Models |
|
|
705 | (1) |
|
Private Versus National Savings |
|
|
706 | (1) |
|
Empirical Evidence: Estimating the Impact of Tax Incentives for Savings on Savings Behavior |
|
|
708 | |
|
Evidence on Tax Incentives and Savings |
|
|
707 | (3) |
|
|
|
710 | (3) |
|
|
|
710 | (1) |
|
|
|
710 | (1) |
|
|
|
711 | (2) |
|
Chapter 23 Taxes on Risk Taking and Wealth |
|
|
713 | (26) |
|
23.1 Taxation and Risk Taking |
|
|
715 | (4) |
|
Basic Financial Investment Model |
|
|
715 | (1) |
|
|
|
716 | (2) |
|
Evidence on Taxation and Risk Taking |
|
|
718 | (1) |
|
Labor Investment Applications |
|
|
718 | (1) |
|
23.2 Capital Gains Taxation |
|
|
719 | (8) |
|
Current Tax Treatment of Capital Gains |
|
|
719 | (2) |
|
What Are the Arguments for Tax Preferences for Capital Gains? |
|
|
721 | (5) |
|
What Are the Arguments Against Tax Preferences for Capital Gains? |
|
|
726 | (1) |
|
Application: Capital Gains Taxation of "Carried Interest" |
|
|
726 | (1) |
|
|
|
727 | (5) |
|
Why Tax Wealth? Arguments for the Estate Tax |
|
|
729 | (1) |
|
Arguments Against the Estate Tax |
|
|
730 | (2) |
|
|
|
732 | (5) |
|
Who Bears the Property Tax? |
|
|
733 | (1) |
|
Types of Property Taxation |
|
|
734 | (3) |
|
Application: Property Tax Breaks to Businesses |
|
|
735 | (2) |
|
|
|
737 | (2) |
|
|
|
737 | (1) |
|
|
|
737 | (1) |
|
|
|
738 | (1) |
|
Chapter 24 Taxation of Business Income |
|
|
739 | (38) |
|
24.1 What Are Corporations, and Why Do We Tax Them? |
|
|
741 | (6) |
|
|
|
742 | (3) |
|
Application: Executive Compensation and the Agency Problem |
|
|
742 | (3) |
|
|
|
745 | (1) |
|
Why Do We Have a Corporate Tax? |
|
|
746 | (1) |
|
24.2 The Structure of the Corporate Tax |
|
|
747 | (4) |
|
|
|
747 | (1) |
|
|
|
747 | (3) |
|
Application: What Is Economic Depreciation? The Case of Personal Computers |
|
|
749 | (1) |
|
|
|
750 | (1) |
|
|
|
750 | (1) |
|
24.3 The Incidence of the Corporate Tax |
|
|
751 | (1) |
|
24.4 The Consequences of the Corporate Tax for Investment |
|
|
752 | (6) |
|
Theoretical Analysis of Corporate Tax and Investment Decisions |
|
|
752 | (5) |
|
Negative Effective Tax Rates |
|
|
757 | (1) |
|
Policy Implications of the Impact of the Corporate Tax on Investment |
|
|
757 | (1) |
|
Evidence on Taxes and Investment |
|
|
758 | (1) |
|
24.5 The Consequences of the Corporate Tax for Financing |
|
|
758 | (9) |
|
The Impact of Taxes on Financing |
|
|
758 | (2) |
|
|
|
760 | (3) |
|
Empirical Evidence: How Do Corporate Taxes Affect a Firm's Financial Structure? |
|
|
763 | (1) |
|
|
|
763 | (1) |
|
How Should Dividends Be Taxed? |
|
|
764 | (2) |
|
Application: The 2003 Dividend Tax Cut |
|
|
765 | (1) |
|
Corporate Tax Integration |
|
|
766 | (1) |
|
24.6 Treatment of International Corporate Income |
|
|
767 | (6) |
|
How to Tax International Income |
|
|
767 | (6) |
|
Application: A Tax Holiday for Foreign Profits |
|
|
768 | (3) |
|
Application: The Apple) B(urger King) C(aterpillar)s of Avoiding Corporate Taxes in a Global System |
|
|
771 | (2) |
|
|
|
773 | (4) |
|
|
|
773 | (1) |
|
|
|
774 | (1) |
|
|
|
775 | (2) |
|
Chapter 25 Fundamental Tax Reform and Consumption Taxation |
|
|
777 | |
|
25.1 Why Fundamental Tax Reform? |
|
|
779 | (10) |
|
|
|
779 | (5) |
|
|
|
779 | (4) |
|
Application: The 1997 IRS Hearings and Their Fallout for Tax Collection |
|
|
783 | (1) |
|
Making the Tax Code Simpler |
|
|
784 | (2) |
|
|
|
786 | (3) |
|
Summary: The Benefits of Fundamental Tax Reform |
|
|
789 | (1) |
|
25.2 The Politics and Economics of Tax Reform |
|
|
789 | (6) |
|
Political Pressures for a Complicated Tax Code |
|
|
790 | (1) |
|
Economic Pressures Against Broadening the Tax Base |
|
|
790 | (4) |
|
Application: Grandfathering in Virginia |
|
|
793 | (1) |
|
|
|
794 | (1) |
|
Application: TRA 86 and Tax Shelters |
|
|
794 | (1) |
|
25.3 Consumption Taxation |
|
|
795 | (9) |
|
Why Might Consumption Make a Better Tax Base? |
|
|
795 | (3) |
|
Why Might Consumption Be a Worse Tax Base? |
|
|
798 | (3) |
|
Designing a Consumption Tax |
|
|
801 | (2) |
|
Backing into Consumption Taxation: Cash-Flow Taxation |
|
|
803 | (1) |
|
|
|
804 | (4) |
|
|
|
805 | (1) |
|
Problems with the Flat Tax |
|
|
805 | (3) |
|
Application: The Camp Tax Reform Proposal |
|
|
807 | (1) |
|
|
|
808 | |
|
|
|
809 | (1) |
|
|
|
809 | (1) |
|
|
|
810 | |
| Glossary |
|
G-1 | |
| References |
|
R-1 | |
| Index |
|
I-1 | |
