| Preface |
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xvii | |
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PART I Introduction and Background |
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Chapter 1 Why Study Public Finance? |
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1 | (24) |
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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 | (1) |
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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 Is the Effect of Those Interventions on Economic Outcomes? |
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8 | (1) |
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Application The CBO: Government Scorekeepers |
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9 | (1) |
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Why Do Governments Choose to Intervene in the Way That They Do? |
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10 | (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 | (9) |
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The Size and Growth of Government |
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11 | (2) |
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13 | (1) |
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Spending, Taxes, Deficits, and Debts |
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13 | (3) |
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16 | (2) |
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Distribution of Revenue Sources |
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18 | (1) |
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Regulatory Role of the Government |
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19 | (1) |
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1.3 The Questions of Public Finance Are Front and Center During Covid-19 |
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20 | (1) |
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When Should the Government Intervene? |
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20 | (1) |
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How Should the Government Intervene? |
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20 | (1) |
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What Are the Effects of Interventions? |
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21 | (1) |
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Why Governments Do What They Do |
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21 | (1) |
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21 | (4) |
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21 | (1) |
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22 | (1) |
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22 | (3) |
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Chapter 2 Theoretical Tools of Public Finance |
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25 | (34) |
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2.1 Constrained Utility Maximization |
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26 | (9) |
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Preferences and Indifference Curves |
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26 | (2) |
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Utility Mapping of Preferences |
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28 | (3) |
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31 | (1) |
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Putting It All Together: Constrained Choice |
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32 | (1) |
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The Effects of Price Changes: Substitution and Income Effects |
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33 | (2) |
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2.2 Putting the Tools to Work: TANF and Labor Supply Among Single Parents |
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35 | (6) |
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Identifying the Budget Constraint |
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36 | (1) |
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The Effect of TANF on the Budget Constraint |
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36 | (5) |
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2.3 Equilibrium and Social Welfare |
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41 | (10) |
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42 | (1) |
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43 | (2) |
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45 | (1) |
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46 | (2) |
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Competitive Equilibrium Maximizes Social Efficiency |
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48 | (1) |
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From Social Efficiency to Social Welfare: The Role of Equity |
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49 | (2) |
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Choosing an Equity Criterion |
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51 | (1) |
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2.4 Welfare Implications of Benefit Reductions: The TANF Example Continued |
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51 | (2) |
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53 | (6) |
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53 | (1) |
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54 | (1) |
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54 | (2) |
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Appendix The Mathematics of Utility Maximization |
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56 | (3) |
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Chapter 3 Empirical Tools of Public Finance |
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59 | (26) |
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3.1 The Important Distinction Between Correlation and Causality |
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60 | (2) |
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61 | (1) |
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3.2 Measuring Causation with Data We'd Like to Have: Randomized Trials |
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62 | (5) |
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Randomized Trials as a Solution |
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62 | (1) |
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63 | (1) |
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64 | (1) |
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Randomized Trials in the TANF Context |
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64 | (1) |
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Application The Rise of Randomized Trials in Developing Economies |
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65 | (1) |
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Why We Need to Go Beyond Randomized Trials |
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66 | (1) |
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3.3 Estimating Causation with Data We Actually Get: Observational Data |
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67 | (12) |
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67 | (3) |
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Cross-Sectional Regression Analysis |
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70 | (4) |
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74 | (3) |
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77 | (2) |
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79 | (6) |
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79 | (1) |
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79 | (1) |
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80 | (2) |
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Appendix Cross-Sectional Regression Analysis |
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82 | (3) |
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Chapter 4 Budget Analysis and Deficit Financing |
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85 | (28) |
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87 | (5) |
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The Budget Deficit in Recent Years |
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87 | (1) |
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88 | (1) |
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Application Efforts to Control the Deficit |
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89 | (3) |
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State and International Deficit Rules |
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92 | (1) |
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4.2 Measuring the Budgetary Position of the Government: Alternative Approaches |
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92 | (5) |
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92 | (2) |
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94 | (1) |
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Cash Versus Capital Accounting |
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95 | (1) |
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Static Versus Dynamic Scoring |
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96 | (1) |
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4.3 Do Current Debts and Deficits Mean Anything? A Long-Run Perspective |
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97 | (7) |
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Background: Present Discounted Value |
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98 | (1) |
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Application Present Discounted Value and Interpreting Sports Contracts |
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98 | (1) |
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Why Current Labels May Be Meaningless |
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99 | (1) |
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Measuring Long-Run Government Budgets |
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99 | (2) |
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What Does the U.S. Government Do? |
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101 | (2) |
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Application The Financial Shenanigans of 2001 and 2018 |
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103 | (1) |
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4.4 Why Do We Care About the Government's Fiscal Position? |
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104 | (6) |
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Short-Run Versus Long-Run Effects of the Government on the Macroeconomy |
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104 | (1) |
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Background: Savings and Economic Growth |
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105 | (1) |
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The Federal Budget, Interest Rates, and Economic Growth |
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106 | (2) |
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Application Secular Stagnation and the New View of Deficits |
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108 | (2) |
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110 | (3) |
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110 | (1) |
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110 | (1) |
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111 | (2) |
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PART II Externalities and Public Goods |
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Chapter 5 Externalities: Problems and Solutions |
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113 | (30) |
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115 | (7) |
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Economics of Negative Production Externalities |
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115 | (2) |
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Negative Consumption Externalities |
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117 | (1) |
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Application The Externality of SUVs |
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118 | (1) |
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119 | (2) |
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Empirical Evidence The Spillover Effects of R&D |
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121 | (1) |
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5.2 Private-Sector Solutions to Negative Externalities |
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122 | (4) |
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122 | (2) |
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The Problems with Coasian Solutions |
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124 | (2) |
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5.3 Public-Sector Remedies for Externalities |
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126 | (6) |
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126 | (1) |
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Application Congestion Pricing |
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127 | (1) |
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128 | (2) |
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Application Operation Warp Speed |
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130 | (1) |
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131 | (1) |
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5.4 Distinctions Between Price and Quantity Approaches to Addressing Externalities |
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132 | (7) |
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132 | (1) |
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Price Regulation (Taxes) Versus Quantity Regulation in This Model |
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133 | (1) |
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Multiple Plants with Different Reduction Costs |
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134 | (2) |
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Uncertainty About Costs of Reduction |
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136 | (3) |
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139 | (4) |
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140 | (1) |
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140 | (1) |
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141 | (2) |
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Chapter 6 Externalities in Action: Environmental and Health Externalities |
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143 | (36) |
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6.1 The Role of Economics in Environmental Regulation: The Case of Particulates |
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145 | (5) |
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History of Particulate Regulation |
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146 | (1) |
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Has the CAA Been a Success? |
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147 | (1) |
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Empirical Evidence Estimating the Adverse Health Effects of Particulates |
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148 | (2) |
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150 | (10) |
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Application The Montreal Protocol |
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153 | (1) |
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154 | (1) |
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Can Trading Make Environmental Agreements More Cost-Effective? |
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154 | (3) |
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Application Congress Takes on Climate Change and Fails |
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157 | (2) |
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The Paris Agreement and the Future |
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159 | (1) |
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6.3 The Economics of Cigarette Smoking |
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160 | (7) |
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The Externalities of Cigarette Smoking |
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162 | (5) |
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6.4 The Economics of Other Externality-Creating Behaviors |
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167 | (8) |
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168 | (1) |
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169 | (1) |
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Empirical Evidence The Effect of Legal Drinking at Age 21 |
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170 | (2) |
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Application Public Policy Toward Obesity |
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172 | (3) |
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175 | (1) |
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175 | (4) |
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175 | (1) |
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176 | (1) |
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177 | (2) |
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179 | (28) |
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7.1 Optimal Provision of Public Goods |
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180 | (5) |
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Optimal Provision of Private Goods |
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181 | (2) |
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Optimal Provision of Public Goods |
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183 | (2) |
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7.2 Private Provision of Public Goods |
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185 | (6) |
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Private-Sector Underprovision |
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185 | (1) |
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Application The Free Rider Problem in Practice |
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186 | (1) |
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Can Private Providers Overcome the Free Rider Problem? |
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187 | (1) |
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Application Business Improvement Districts |
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187 | (1) |
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When Is Private Provision Likely to Overcome the Free Rider Problem? |
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188 | (3) |
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7.3 Public Provision of Public Goods |
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191 | (8) |
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Empirical Evidence Measuring Crowd-Out |
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192 | (2) |
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The Right Mix of Public and Private |
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194 | (1) |
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Application The Good and Bad Sides of Contracting Out |
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195 | (3) |
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Measuring the Costs and Benefits of Public Goods |
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198 | (1) |
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How Can We Measure Preferences for Public Goods? |
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199 | (1) |
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199 | (8) |
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200 | (1) |
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200 | (1) |
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201 | (2) |
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Appendix The Mathematics of Public Goods Provision |
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203 | (1) |
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203 | (1) |
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203 | (1) |
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204 | (1) |
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Different Types of Individuals |
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204 | (1) |
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204 | (3) |
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Chapter 8 Cost-Benefit Analysis |
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207 | (22) |
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8.1 Measuring the Costs of Public Projects |
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208 | (14) |
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209 | (1) |
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209 | (3) |
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8.2 Measuring the Benefits of Public Projects |
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212 | (1) |
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Valuing Driving Time Saved |
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212 | (1) |
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Application The Problems of Contingent Valuation |
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213 | (1) |
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Empirical Evidence Valuing Time Savings |
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214 | (1) |
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215 | (1) |
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215 | (6) |
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Empirical Evidence How Much Does It Cost to Avoid a Traffic Fatality? |
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221 | (1) |
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Discounting Future Benefits |
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221 | (1) |
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Cost-Effectiveness Analysis |
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222 | (1) |
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8.3 Putting It All Together |
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222 | (2) |
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Other Issues in Cost-Benefit Analysis |
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223 | (1) |
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224 | (5) |
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224 | (1) |
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224 | (1) |
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225 | (4) |
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Chapter 9 Political Economy |
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229 | (34) |
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9.1 Unanimous Consent on Public Goods Levels |
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231 | (3) |
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231 | (2) |
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Problems with Lindahl Pricing |
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233 | (1) |
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9.2 Mechanisms for Aggregating Individual Preferences |
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234 | (8) |
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APPLICATION Direct Democracy in the United States |
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234 | (2) |
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Majority Voting: When It Works |
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236 | (1) |
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Majority Voting: When It Doesn't Work |
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237 | (1) |
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Arrow's Impossibility Theorem |
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238 | (1) |
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Restricting Preferences to Solve the Impossibility Problem |
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239 | (1) |
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240 | (1) |
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The Potential Inefficiency of the Median Voter Outcome |
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241 | (1) |
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241 | (1) |
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9.3 Representative Democracy |
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242 | (12) |
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Vote-Maximizing Politicians Represent the Median Voter |
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242 | (1) |
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Assumptions of the Median Voter Model |
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243 | (2) |
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245 | (1) |
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Application Farm Policy in the United States |
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246 | (2) |
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Evidence on the Median Voter Model for Representative Democracy |
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248 | (1) |
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Empirical Evidence Testing the Median Voter Model |
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249 | (1) |
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Increasing Polarization in American Politics |
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249 | (5) |
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9.4 Public Choice Theory: The Foundations of Government Failure |
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254 | (5) |
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Size-Maximizing Bureaucracy |
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255 | (1) |
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255 | (1) |
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256 | (1) |
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Application Government Corruption |
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256 | (2) |
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Empirical Evidence Government Failures and Economic Growth |
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258 | (1) |
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The Implications of Government Failure |
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259 | (1) |
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259 | (4) |
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260 | (1) |
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260 | (1) |
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261 | (2) |
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Chapter 10 State and Local Government Expenditures |
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263 | (28) |
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10.1 Fiscal Federalism in the United States and Abroad |
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265 | (3) |
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Spending and Revenue of State and Local Governments |
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266 | (1) |
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267 | (1) |
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10.2 Optimal Fiscal Federalism |
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268 | (8) |
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268 | (2) |
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Problems with the Tiebout Model |
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270 | (2) |
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Evidence on the Tiebout Model |
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272 | (1) |
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Optimal Fiscal Federalism |
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273 | (1) |
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Empirical Evidence Evidence for Capitalization from California's Proposition 13 |
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274 | (2) |
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10.3 Redistribution Across Communities |
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276 | (11) |
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277 | (1) |
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Application Barriers to Tiebout and the "Great Divergence" |
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278 | (1) |
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Tools of Redistribution: Grants |
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279 | (5) |
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Redistribution in Action: School Finance Equalization |
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284 | (2) |
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Empirical Evidence (The Flypaper Effect: Here, Gone, and Back Again? |
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286 | (1) |
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Application School Finance Equalization and Property Tax Limitations in California |
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287 | (1) |
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287 | (4) |
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288 | (1) |
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288 | (1) |
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289 | (2) |
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291 | (30) |
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11.1 Why Should the Government Be Involved in Education? |
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294 | (2) |
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294 | (1) |
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294 | (1) |
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295 | (1) |
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Failure to Maximize Family Utility |
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295 | (1) |
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295 | (1) |
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11.2 How Is the Government Involved in Education? |
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296 | (8) |
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Free Public Education and Crowding Out |
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296 | (2) |
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Solving the Crowd-Out Problem: Vouchers |
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298 | (2) |
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Problems with Educational Vouchers |
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300 | (1) |
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Vouchers May Increase School Segregation |
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301 | (1) |
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Vouchers May Be an Inefficient and Inequitable Use of Public Resources |
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302 | (2) |
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11.3 Evidence on Competition in Education Markets |
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304 | (3) |
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Direct Experience with Vouchers |
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304 | (1) |
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Experience with Public School Choice |
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304 | (1) |
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Experience with Public School Incentives |
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305 | (1) |
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Empirical Evidence Estimating the Effects of Voucher Programs |
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306 | (1) |
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Bottom Line on Vouchers and School Choice |
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307 | (1) |
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11.4 Measuring the Returns to Education |
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307 | (4) |
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Effects of Education Levels on Productivity |
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307 | (2) |
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Empirical Evidence Estimating the Return to Education |
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309 | (1) |
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Effects of Education Levels on Other Outcomes |
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310 | (1) |
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The Impact of School Quality |
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310 | (1) |
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Empirical Evidence Estimating the Effects of School Quality |
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311 | (1) |
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11.5 The Role of the Government in Higher Education |
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311 | (5) |
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312 | (1) |
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What Is the Market Failure, and How Should It Be Addressed? |
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313 | (1) |
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Application Addressing Student Loan Debt in the United States |
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314 | (2) |
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316 | (5) |
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316 | (1) |
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317 | (1) |
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318 | (3) |
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PART III Social Insurance and Redistribution |
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Chapter 12 Social Insurance: The New Function of Government |
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321 | (28) |
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12.1 What Is Insurance and Why Do Individuals Value It? |
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323 | (4) |
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323 | (1) |
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Why Do Individuals Value Insurance? |
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323 | (1) |
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Formalizing This Intuition: Expected Utility Model |
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324 | (3) |
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12.2 Why Have Social Insurance? Asymmetric Information and Adverse Selection |
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327 | (5) |
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327 | (1) |
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Example with Perfect Information |
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328 | (1) |
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Example with Asymmetric Information |
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328 | (1) |
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The Problem of Adverse Selection |
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329 | (1) |
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Does Asymmetric Information Necessarily Lead to Market Failure? |
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330 | (1) |
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Application Adverse Selection and Health Insurance "Death Spirals" |
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331 | (1) |
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How Does the Government Address Adverse Selection? |
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332 | (1) |
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12.3 Other Reasons for Government Intervention in Insurance Markets |
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332 | (4) |
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332 | (1) |
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333 | (1) |
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333 | (1) |
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333 | (1) |
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Application Flood Insurance and the Samaritan's Dilemma |
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334 | (2) |
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12.4 Social Insurance Versus Self-Insurance: How Much Consumption Smoothing? |
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336 | (2) |
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Example: Unemployment Insurance |
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336 | (2) |
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Lessons for Consumption-Smoothing Role of Social |
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338 | (1) |
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12.5 The Problem with Insurance: Moral Hazard |
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338 | (4) |
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Application The Problems with Assessing Workers' Compensation Injuries |
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339 | (1) |
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What Determines Moral Hazard? |
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340 | (1) |
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Moral Hazard Is Multidimensional |
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340 | (1) |
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The Consequences of Moral Hazard |
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341 | (1) |
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12.6 Putting It All Together: Optimal Social Insurance |
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342 | (1) |
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342 | (7) |
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343 | (1) |
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343 | (1) |
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344 | (2) |
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Appendix Mathematical Models of Expected Utility |
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346 | (1) |
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346 | (1) |
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347 | (2) |
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Chapter 13 Social Security |
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349 | (32) |
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13.1 What Is Social Security, and How Does It Work? |
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350 | (9) |
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351 | (1) |
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Application why Choose 35 Years? |
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352 | (2) |
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How Does Social Security Work over Time? |
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354 | (2) |
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Application Ida May Fuller |
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356 | (1) |
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How Does Social Security Redistribute in Practice? |
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357 | (2) |
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13.2 Consumption-Smoothing Benefits of Social Security |
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359 | (3) |
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Rationales for Social Security |
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359 | (1) |
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Does Social Security Smooth Consumption? |
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360 | (1) |
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Empirical Evidence Measuring the Crowd-Out Effect of Social Security on Savings |
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361 | (1) |
|
13.3 Social Security and Retirement |
|
|
362 | (4) |
|
|
|
362 | (1) |
|
|
|
363 | (2) |
|
Application Implicit Social Security Taxes and Retirement Behavior |
|
|
365 | (1) |
|
|
|
365 | (1) |
|
13.4 Social Security Reform |
|
|
366 | (11) |
|
Reform First Steps: The Greenspan Commission |
|
|
367 | (1) |
|
Application The Social Security Trust Fund and National Savings |
|
|
368 | (1) |
|
Potential Next Steps: Incremental Reforms |
|
|
368 | (2) |
|
Application Early Entitlements: Liquidity Versus Behavioral Biases |
|
|
370 | (3) |
|
Fundamental Reform: Privatization |
|
|
373 | (2) |
|
Application Company Stock in 401 (k) Plans |
|
|
375 | (1) |
|
Application Mixed Proposals for Social Security Reform |
|
|
376 | (1) |
|
|
|
377 | (4) |
|
|
|
377 | (1) |
|
|
|
377 | (1) |
|
|
|
378 | (3) |
|
Chapter 14 Unemployment Insurance, Disability Insurance, and Workers' Compensation |
|
|
381 | (30) |
|
14.1 Institutional Features of Unemployment Insurance, Disability Insurance, and Workers' Compensation |
|
|
383 | (6) |
|
Institutional Features of Unemployment Insurance |
|
|
383 | (2) |
|
Institutional Features of Disability Insurance |
|
|
385 | (1) |
|
Institutional Features of Workers' Compensation |
|
|
386 | (1) |
|
Comparison of the Features of Ul, Dl, and WC |
|
|
387 | (1) |
|
Application The Duration of Social Insurance Benefits Around the World |
|
|
388 | (1) |
|
14.2 Consumption-Smoothing Benefits of Social Insurance Programs |
|
|
389 | (2) |
|
Empirical Evidence Moral Hazard Effects of Unemployment Insurance |
|
|
390 | (1) |
|
14.3 Moral Hazard Effects of Social Insurance Programs |
|
|
391 | (7) |
|
Moral Hazard Effects of Unemployment Insurance |
|
|
392 | (1) |
|
Evidence for Moral Hazard in Dl |
|
|
393 | (1) |
|
Empirical Evidence Disability Insurance Screening and Labor Supply |
|
|
394 | (2) |
|
Evidence for Moral Hazard in WC |
|
|
396 | (1) |
|
Empirical Evidence Moral Hazard Effects of Workers' Compensation |
|
|
397 | (1) |
|
14.4 The Costs and Benefits of Social Insurance to Firms |
|
|
398 | (3) |
|
The Effects of Partial Experience Rating in Ul on Layoffs |
|
|
398 | (2) |
|
The "Benefits" of Partial Experience Rating |
|
|
400 | (1) |
|
Application The "Cash Cow" of Partial Experience Rating |
|
|
400 | (1) |
|
Workers' Compensation and Firms |
|
|
401 | (1) |
|
14.5 Implications for Program Reform |
|
|
401 | (5) |
|
|
|
401 | (1) |
|
|
|
402 | (1) |
|
|
|
402 | (1) |
|
Application Modernizing Ul |
|
|
403 | (3) |
|
|
|
406 | (5) |
|
|
|
406 | (1) |
|
|
|
407 | (1) |
|
|
|
408 | (1) |
|
Appendix Advanced Quasi-Experimental Analysis |
|
|
409 | (2) |
|
Chapter 15 Health Insurance I: Health Economics and Private Health Insurance |
|
|
411 | (36) |
|
15.1 An Overview of Health Care in the United States |
|
|
413 | (15) |
|
Application Finding the Inefficiency in U.S. HealthCare |
|
|
414 | (6) |
|
How Health Insurance Works: The Basics |
|
|
420 | (1) |
|
|
|
420 | (4) |
|
|
|
424 | (1) |
|
|
|
424 | (1) |
|
|
|
424 | (1) |
|
|
|
425 | (2) |
|
Empirical Evidence Health Insurance and Mobility |
|
|
427 | (1) |
|
15.2 How Generous Should Insurance Be to Patients? |
|
|
428 | (11) |
|
Consumption-Smoothing Benefits of Health Insurance for Patients |
|
|
428 | (1) |
|
Moral Hazard Costs of Health Insurance for Patients |
|
|
429 | (2) |
|
How Elastic Is the Demand for Medical Care? The RAND Health Insurance Experiment |
|
|
431 | (1) |
|
Empirical Evidence Estimating the Elasticity of Demand for Medical Care |
|
|
432 | (2) |
|
|
|
434 | (2) |
|
Application The Growth of High-Deductible Plans in the United States |
|
|
436 | (3) |
|
15.3 How Generous Should Insurance Be to Medical Providers? |
|
|
439 | (3) |
|
Managed Care and Prospective Reimbursement |
|
|
439 | (2) |
|
The Impacts of Managed Care |
|
|
441 | (1) |
|
How Should Providers Be Reimbursed? |
|
|
442 | (1) |
|
|
|
442 | (5) |
|
|
|
442 | (1) |
|
|
|
443 | (1) |
|
|
|
444 | (3) |
|
Chapter 16 Health Insurance II: Medicare, Medicaid, and Health Care Reform |
|
|
447 | (38) |
|
16.1 The Medicaid Program for Low-Income Families |
|
|
449 | (2) |
|
|
|
449 | (1) |
|
Who Is Eligible for Medicaid? |
|
|
449 | (1) |
|
What Health Services Does Medicaid Cover? |
|
|
450 | (1) |
|
How Do Providers Get Paid? |
|
|
450 | (1) |
|
16.2 What Are the Benefits of the Medicaid Program? |
|
|
451 | (4) |
|
Does Medicaid Provide Financial Protection? |
|
|
451 | (1) |
|
Does Medicaid Improve Health? |
|
|
451 | (1) |
|
How Does Medicaid Affect Health? Evidence |
|
|
452 | (2) |
|
Empirical Evidence Using State Medicaid Expansions to Estimate Program Effects |
|
|
454 | (1) |
|
16.3 The Medicare Program |
|
|
455 | (4) |
|
|
|
455 | (2) |
|
Application The Medicare Prescription Drug Debate |
|
|
457 | (2) |
|
16.4 Controlling Costs in the Medicare Program |
|
|
459 | (9) |
|
The Prospective Payment System |
|
|
459 | (1) |
|
|
|
460 | (1) |
|
Lesson: The Difficulty of Partial Reform |
|
|
461 | (1) |
|
|
|
461 | (1) |
|
Empirical Evidence Short Stays in Long-Term Care Hospitals |
|
|
462 | (3) |
|
Should Medicare Move to a Full-Choice Plan? Premium Support |
|
|
465 | (1) |
|
Application A Premium Support System for Medicare |
|
|
465 | (2) |
|
Gaps in Medicare Coverage |
|
|
467 | (1) |
|
|
|
468 | (1) |
|
|
|
468 | (1) |
|
16.6 Health Care Reform and the ACA |
|
|
469 | (10) |
|
|
|
469 | (2) |
|
The Massachusetts Experiment with Incremental Universalism |
|
|
471 | (1) |
|
|
|
472 | (2) |
|
Application Rising Health Care Costs and Cost Control Efforts in the ACA |
|
|
474 | (2) |
|
Early Evidence on the Effects of the ACA |
|
|
476 | (1) |
|
The ACA Runs into Trouble |
|
|
477 | (1) |
|
What Does the Future Hold? |
|
|
478 | (1) |
|
|
|
479 | (6) |
|
Empirical Evidence The Impact of the ACA on Mortality |
|
|
480 | (1) |
|
|
|
480 | (2) |
|
|
|
482 | (1) |
|
|
|
483 | (2) |
|
Chapter 17 Income Inequality and Government Transfer Programs |
|
|
485 | (42) |
|
17.1 Facts on Income Distribution in the United States |
|
|
488 | (6) |
|
Relative Income Inequality |
|
|
488 | (1) |
|
Absolute Deprivation and Poverty Rates |
|
|
489 | (2) |
|
APPLICATION Problems in Poverty Line Measurement |
|
|
491 | (2) |
|
What Matters--Relative or Absolute Deprivation? |
|
|
493 | (1) |
|
17.2 Transfer Policy in the United States |
|
|
494 | (3) |
|
|
|
494 | (2) |
|
|
|
496 | (1) |
|
17.3 The Moral Hazard Costs of Transfer Policy |
|
|
497 | (5) |
|
Moral Hazard Effects of a Means-Tested Transfer System |
|
|
497 | (3) |
|
Solving Moral Hazard by Lowering the Benefit Reduction Rate |
|
|
500 | (1) |
|
The "Iron Triangle" of Redistributive Programs |
|
|
501 | (1) |
|
17.4 Reducing the Moral Hazard of Transfers |
|
|
502 | (17) |
|
Moving to Categorical Transfer Payments |
|
|
502 | (2) |
|
|
|
504 | (2) |
|
Empirical Evidence The Benefits of In-Kind Benefits |
|
|
506 | (2) |
|
Application An Example of Ordeal Mechanisms |
|
|
508 | (1) |
|
Increasing Outside Options |
|
|
509 | (3) |
|
Empirical Evidence The Canadian Self-Sufficiency Project |
|
|
512 | (1) |
|
Empirical Evidence Child Care, Preschool, and Child Outcomes |
|
|
513 | (3) |
|
Application Evaluating the 1996 Transfer Reform |
|
|
516 | (3) |
|
17.5 Universal Basic Income? |
|
|
519 | (3) |
|
Empirical Evidence The Alaska Permanent Fund Dividend and Labor Supply |
|
|
520 | (2) |
|
|
|
522 | (5) |
|
|
|
523 | (1) |
|
|
|
523 | (1) |
|
|
|
524 | (3) |
|
PART IV Taxation in Theory and Practice |
|
|
|
Chapter 18 Taxation: How It Works and What It Means |
|
|
527 | (32) |
|
|
|
529 | (2) |
|
|
|
529 | (1) |
|
Taxes on Individual Income |
|
|
529 | (1) |
|
Taxes on Corporate Income |
|
|
529 | (1) |
|
|
|
530 | (1) |
|
|
|
530 | (1) |
|
Taxation Around the World |
|
|
530 | (1) |
|
18.2 Structure of the Individual Income Tax in the United States |
|
|
531 | (3) |
|
|
|
532 | (1) |
|
|
|
533 | (1) |
|
18.3 Measuring the Fairness of Tax Systems |
|
|
534 | (4) |
|
Average and Marginal Tax Rates |
|
|
535 | (1) |
|
Vertical and Horizontal Equity |
|
|
535 | (1) |
|
Measuring Vertical Equity |
|
|
536 | (1) |
|
Application The Political Process of Measuring Tax Fairness |
|
|
536 | (2) |
|
18.4 Defining the Income Tax Base |
|
|
538 | (4) |
|
The Haig-Simons Comprehensive Income Definition |
|
|
538 | (1) |
|
Deviations Due to Ability-to-Pay Considerations |
|
|
539 | (1) |
|
Deviations Due to Costs of Earning Income |
|
|
540 | (1) |
|
Application What Are Appropriate Business Deductions? |
|
|
541 | (1) |
|
18.5 Externality/Public Goods Rationales for Deviating from Haig-Simons |
|
|
542 | (10) |
|
|
|
542 | (1) |
|
Spending Crowd-Out Versus Tax Subsidy Crowd-In |
|
|
542 | (2) |
|
Consumer Sovereignty Versus Imperfect Information |
|
|
544 | (1) |
|
|
|
545 | (2) |
|
Tax Deductions Versus Tax Credits |
|
|
547 | (1) |
|
Empirical Evidence The Social Benefits of Homeownership |
|
|
547 | (2) |
|
Application The Readability Debate |
|
|
549 | (1) |
|
Bottom Line: Tax Expenditures |
|
|
550 | (1) |
|
Application A Tax Break for Olympians? |
|
|
551 | (1) |
|
18.6 The Appropriate Unit of Taxation |
|
|
552 | (3) |
|
The Problem of the "Marriage Tax" |
|
|
552 | (1) |
|
Marriage Taxes in Practice |
|
|
553 | (2) |
|
|
|
555 | (4) |
|
|
|
555 | (1) |
|
|
|
556 | (1) |
|
|
|
557 | (2) |
|
Chapter 19 The Equity Implications of Taxation: Tax Incidence |
|
|
559 | (28) |
|
19.1 The Three Rules of Tax Incidence |
|
|
561 | (9) |
|
Rule 1 The Statutory Burden of a Tax Does Not Describe Who Really Bears the Tax |
|
|
561 | (2) |
|
Rule 2 The Side of the Market on Which the Tax Is Imposed Is Irrelevant to the Distribution of the Tax Burdens |
|
|
563 | (2) |
|
Rule 3 Parties with Inelastic Supply or Demand Bear Taxes; Parties with Elastic Supply or Demand Avoid Them |
|
|
565 | (4) |
|
Reminder: Tax Incidence Is About Prices, Not Quantities |
|
|
569 | (1) |
|
Reminder: Balanced Budget Tax Incidence |
|
|
569 | (1) |
|
Empirical Evidence Trie Incidence of Taxation: Real-World Complications |
|
|
570 | (1) |
|
19.2 Example: Tax Incidence in Factor Markets |
|
|
570 | (4) |
|
19.3 General Equilibrium Tax Incidence |
|
|
574 | (5) |
|
Effects of a Restaurant Tax: A General Equilibrium Example |
|
|
574 | (2) |
|
Issues to Consider in General Equilibrium Incidence Analysis |
|
|
576 | (3) |
|
Empirical Evidence Does Taxing Business Owners Tax Employees? |
|
|
579 | (1) |
|
19.4 The Incidence of Taxation in the United States |
|
|
579 | (4) |
|
TPC Incidence Assumptions |
|
|
579 | (1) |
|
Results of TPC Incidence Analysis |
|
|
580 | (2) |
|
Current Versus Lifetime Income Incidence |
|
|
582 | (1) |
|
|
|
583 | (4) |
|
|
|
583 | (1) |
|
|
|
583 | (1) |
|
|
|
584 | (1) |
|
Appendix The Mathematics of Tax Incidence |
|
|
585 | (1) |
|
|
|
585 | (1) |
|
Tax Incidence in a Monopoly |
|
|
586 | (1) |
|
Chapter 20 Tax Inefficiencies and Their Implications for Optimal Taxation |
|
|
587 | (34) |
|
20.1 Taxation and Economic Efficiency |
|
|
588 | (12) |
|
|
|
588 | (1) |
|
Elasticities Determine Tax Inefficiency |
|
|
589 | (2) |
|
Empirical Evidence The Window Tax |
|
|
591 | (1) |
|
Application tax Avoidance in Practice |
|
|
592 | (2) |
|
Determinants of Deadweight Loss |
|
|
594 | (1) |
|
Deadweight Loss and the Design of Efficient Tax Systems |
|
|
595 | (5) |
|
Application Misperceived Taxes |
|
|
600 | (1) |
|
20.2 Optimal Commodity Taxation |
|
|
600 | (6) |
|
Ramsey Taxation: The Theory of Optimal Commodity Taxation |
|
|
601 | (1) |
|
|
|
602 | (1) |
|
Equity Implications of the Ramsey Model |
|
|
602 | (1) |
|
Application Price Reform in Pakistan |
|
|
603 | (3) |
|
20.3 Optimal Income Taxes |
|
|
606 | (4) |
|
|
|
606 | (1) |
|
General Model with Behavioral Effects |
|
|
606 | (2) |
|
|
|
608 | (2) |
|
20.4 Tax-Benefit Linkages and the Financing of Social Insurance Programs |
|
|
610 | (4) |
|
|
|
610 | (2) |
|
Issues Raised by Tax-Benefit Linkage Analysis |
|
|
612 | (1) |
|
Empirical Evidence A Group-Specific Employer Mandate |
|
|
613 | (1) |
|
|
|
614 | (7) |
|
|
|
614 | (1) |
|
|
|
614 | (1) |
|
|
|
615 | (2) |
|
Appendix The Mathematics of Optimal Taxation |
|
|
617 | (1) |
|
Deriving the Formula for Deadweight Loss |
|
|
617 | (1) |
|
Behavioral Responses to Taxation and Deadweight Loss: A Technical Point |
|
|
617 | (1) |
|
Deriving Optimal Commodity Tax Rates |
|
|
618 | (1) |
|
Deriving Optimal Income Tax Rates |
|
|
619 | (2) |
|
Chapter 21 Taxes on Labor Supply |
|
|
621 | (24) |
|
21.1 Taxation and Labor Supply--Theory |
|
|
623 | (2) |
|
|
|
623 | (2) |
|
Limitations of the Theory: Constraints on Hours Worked and Overtime Pay Rules |
|
|
625 | (1) |
|
21.2 Taxation and Labor Supply--Evidence |
|
|
625 | (4) |
|
Limitations of Existing Studies |
|
|
626 | (1) |
|
Empirical Evidence Estimating the Elasticity of Labor Supply |
|
|
627 | (2) |
|
21.3 Tax Policy to Promote Labor Supply: The Earned Income Tax Credit |
|
|
629 | (8) |
|
|
|
629 | (1) |
|
Impact of EITC on Labor Supply: Theory |
|
|
630 | (2) |
|
Impact of EITC on Labor Supply: Evidence |
|
|
632 | (2) |
|
Empirical Evidence The Effect of the EITC on Single-Parent Labor Supply |
|
|
634 | (1) |
|
|
|
635 | (1) |
|
|
|
635 | (2) |
|
21.4 The Tax Treatment of Child Care and Its Impact on Labor Supply |
|
|
637 | (4) |
|
The Tax Treatment of Child Care |
|
|
637 | (1) |
|
Options for Resolving Tax Wedges |
|
|
638 | (1) |
|
Empirical Evidence The Effect of Child Care Costs on Maternal Labor Supply |
|
|
639 | (1) |
|
|
|
640 | (1) |
|
|
|
641 | (4) |
|
|
|
641 | (1) |
|
|
|
641 | (1) |
|
|
|
642 | (3) |
|
Chapter 22 Taxes on Savings |
|
|
645 | (26) |
|
22.1 Taxation and Savings--Theory and Evidence |
|
|
647 | (6) |
|
|
|
647 | (3) |
|
Evidence: How Does the After-Tax Interest Rate Affect Savings? |
|
|
650 | (1) |
|
Inflation and the Taxation of Savings |
|
|
651 | (2) |
|
22.2 Alternative Models of Savings |
|
|
653 | (3) |
|
Precautionary Savings Models |
|
|
653 | (1) |
|
|
|
653 | (1) |
|
Empirical Evidence Social Insurance and Personal Savings |
|
|
654 | (2) |
|
22.3 Tax Incentives for Retirement Savings |
|
|
656 | (12) |
|
Available Tax Subsidies for Retirement Savings |
|
|
656 | (3) |
|
Theoretical Effects of Tax-Subsidized Retirement Savings |
|
|
659 | (3) |
|
|
|
662 | (2) |
|
Implications of Alternative Models |
|
|
664 | (1) |
|
Private Versus National Savings |
|
|
665 | (1) |
|
Empirical Evidence Estimating the Impact of Tax Incentives for Savings on Savings Behavior |
|
|
666 | (1) |
|
Evidence on Tax Incentives and Savings |
|
|
667 | (1) |
|
|
|
668 | (3) |
|
|
|
668 | (1) |
|
|
|
669 | (1) |
|
|
|
670 | (1) |
|
Chapter 23 Taxes on Risk Taking and Wealth |
|
|
671 | (28) |
|
23.1 Taxation and Risk Taking |
|
|
673 | (4) |
|
Basic Financial Investment Model |
|
|
673 | (2) |
|
|
|
675 | (1) |
|
Evidence on Taxation and Risk Taking |
|
|
676 | (1) |
|
Labor Investment Applications |
|
|
676 | (1) |
|
23.2 Capital Gains Taxation |
|
|
677 | (8) |
|
Current Tax Treatment of Capital Gains |
|
|
677 | (2) |
|
What Are the Arguments for Tax Preferences for Capital Gains? |
|
|
679 | (3) |
|
Empirical Evidence Taxation and Capital Gains |
|
|
682 | (2) |
|
What Are the Arguments Against Tax Preferences for Capital Gains? |
|
|
684 | (1) |
|
Application Capital Gains Taxation of "Carried Interest" |
|
|
685 | (1) |
|
|
|
685 | (6) |
|
Why Tax Wealth? Arguments for the Estate Tax |
|
|
687 | (1) |
|
Arguments Against the Estate Tax |
|
|
688 | (2) |
|
Application should We Tax Wealth? |
|
|
690 | (1) |
|
|
|
691 | (5) |
|
Who Bears the Property Tax? |
|
|
692 | (1) |
|
Types of Property Taxation |
|
|
693 | (1) |
|
Application Property Tax Breaks to Businesses |
|
|
694 | (2) |
|
|
|
696 | (3) |
|
|
|
696 | (1) |
|
|
|
697 | (1) |
|
|
|
697 | (2) |
|
Chapter 24 Taxation of Business Income |
|
|
699 | (32) |
|
24.1 What Are Corporations, and Why Do We Tax Them? |
|
|
700 | (3) |
|
|
|
701 | (1) |
|
|
|
702 | (1) |
|
Why Do We Have a Corporate Tax? |
|
|
703 | (1) |
|
24.2 The Structure of the Corporate Tax |
|
|
703 | (3) |
|
|
|
704 | (1) |
|
|
|
704 | (1) |
|
Application What Is Economic Depreciation? The Case of Personal Computers |
|
|
705 | (1) |
|
|
|
706 | (1) |
|
|
|
706 | (1) |
|
24.3 The Incidence of the Corporate Tax |
|
|
706 | (2) |
|
Empirical Evidence Corporate Taxation and Wages |
|
|
707 | (1) |
|
24.4 The Consequences of the Corporate Tax for Investment |
|
|
708 | (6) |
|
Theoretical Analysis of Corporate Tax and Investment Decisions |
|
|
708 | (4) |
|
Negative Effective Tax Rates |
|
|
712 | (1) |
|
Policy Implications of the Impact of the Corporate Tax on Investment |
|
|
713 | (1) |
|
Empirical Evidence Accelerated Depreciation and Investment |
|
|
713 | (1) |
|
24.5 Treatment of International Corporate Income |
|
|
714 | (7) |
|
How to Tax International Income |
|
|
714 | (2) |
|
Application The A(pple) Bfurger King) C(aterpillar)s of Avoiding Corporate Taxes on International Income |
|
|
716 | (2) |
|
Global Versus Territorial Taxation |
|
|
718 | (1) |
|
Application The 2017 Tax Reform and Corporate Tax Wedges |
|
|
719 | (2) |
|
24.6 The Consequences of the Corporate Tax for Financing |
|
|
721 | (7) |
|
The Impact of Taxes on Financing |
|
|
721 | (1) |
|
|
|
722 | (3) |
|
Empirical Evidence How Do Corporate Taxes Affect a Firm's Financial Structure? |
|
|
725 | (1) |
|
|
|
725 | (1) |
|
How Should Dividends Be Taxed? |
|
|
726 | (1) |
|
Application The 2003 Dividend Tax Cut |
|
|
727 | (1) |
|
Corporate Tax Integration |
|
|
728 | (1) |
|
|
|
728 | (3) |
|
|
|
729 | (1) |
|
|
|
729 | (1) |
|
|
|
730 | (1) |
|
Chapter 25 Fundamental Tax Reform and Consumption Taxation |
|
|
731 | (1) |
|
25.1 Why Fundamental Tax Reform? |
|
|
732 | (1) |
|
|
|
733 | (1) |
|
|
|
733 | (3) |
|
Empirical Evidence What Determines Tax Compliance? |
|
|
736 | (1) |
|
Application The 1997 IRS Hearings and Their Fallout for Tax Collection |
|
|
736 | (2) |
|
Making the Tax Code Simpler |
|
|
738 | (2) |
|
Empirical Evidence The Revealed Burden on Tax Filing |
|
|
740 | (2) |
|
|
|
742 | (2) |
|
Summary: The Benefits of Fundamental Tax Reform |
|
|
744 | (1) |
|
25.2 The Politics and Economics of Tax Reform |
|
|
745 | (5) |
|
Political Pressures for a Complicated Tax Code |
|
|
745 | (1) |
|
Economic Pressures Against Broadening the Tax Base |
|
|
746 | (2) |
|
Application Grandfathering in Virginia |
|
|
748 | (1) |
|
|
|
749 | (1) |
|
Application Tra 86 and Tax Shelters |
|
|
749 | (1) |
|
25.3 Consumption Taxation |
|
|
750 | (8) |
|
Why Might Consumption Make a Better Tax Base? |
|
|
750 | (3) |
|
Why Might Consumption Be a Worse Tax Base? |
|
|
753 | (3) |
|
Designing a Consumption Tax |
|
|
756 | (1) |
|
Backing into Consumption Taxation: Cash-Flow Taxation |
|
|
757 | (1) |
|
|
|
758 | (2) |
|
|
|
758 | (1) |
|
Problems with the Flat Tax |
|
|
759 | (1) |
|
|
|
760 | (1) |
|
|
|
760 | (1) |
|
|
|
760 | (1) |
|
|
|
761 | |
| Glossary |
|
1 | (1) |
| References |
|
1 | (1) |
| Index |
|
1 | |
