Public Finance--while continuing to follow an innovative approach that is both theoretical and empirical--is now completely updated to reflect major changes in its key topics. New or revised information includes explanations of the Social Security trust fund, a new section on the alternative minimum tax (AMT), possible links between the corporation tax and high-profile scandals such as Enron, and more.



Part One: Introduction

1. Introduction: Public Finance and Ideology Government at a Glance

2.Tools of Positive Analysis:The Role of Theory Methods of

Empirical Analysis Concluding Remarks

3. Tools of Normative Analysis: Welfare Economics

The First Fundamental Theorem of Welfare Economics

Fairness and the Second Fundamental Theorem of Welfare Economics

Market Failure

Buying into Welfare Economics



Part Two: Analysis of Public Expenditure

4. Public Goods: Public Goods Defined

Efficient Provision of Public Goods

The Privatization Debate

Education

Public Goods and Public Choice

5. Externalities:

The Nature of Externalities

Graphical Analysis

Private Responses

Public Responses to Externalities

The US Response

Implications for Income Distribution

Positive Externalities

6. Political Economy:

Direct Democracy

Representative Democracy

Explaining Government Growth

7. Income Redistribution, Conceptual Issues:

Distribution of Income

Rationales for Income Redistribution

Expenditure Incidence

8. Expenditure Programs for the Poor:

A Quick Look at Welfare Spending

Institutional Setting

Issues in the Design of Welfare Programs

The Earned Income Tax Credit

Supplemental Security Income

Medicaid

Food Stamps and Child Nutrition

Housing Assistance

Programs to Enhance Earnings

9. Social Insurance I: Social Security and Unemployment Insurance: Why Have Social Insurance?

Structure of Social Security

Effects on Economic Behavior

Long-Term Stresses on Social Security

Social Security Reform

Unemployment Insurance

Conclusions

10. Social Insurance II: Health Care:

What?s Special About Health Care?

The US Health Care Market

The Role of Government

The Twin Issues: Access and Cost

Should Government?s Role in Health Care Increase?

11. Cost-Benefit Analysis:Present Value

Private Sector Project Evaluation

Discount Rate for Government Projects

Valuing Public Benefits and Costs

Games Cost?Benefit Analysts Play

Distributional Considerations

Uncertainty

An Application: Are Reductions in Class Size Worth It?

Use (and Nonuse) by Government



Part Three: A Framework for Tax Analysis

12.Taxation and Income Distribution:

Tax Incidence: General Remarks

Partial Equilibrium Models

General Equilibrium Models

Conclusions

13.Taxation and Efficiency:

Excess Burden Defined

Excess Burden Measurement with Demand Curves

Differential Taxation of Inputs

Does Efficient Taxation Matter?

14.Efficient and Equitable Taxation:

Optimal Commodity Taxation

Optimal User Fees

Optimal Income Taxation

Politics and the Time Inconsistency Problem

Other Criteria for Tax Design



Part Four: The United States Revenue System

15.The Personal Income Tax:

Basic Structure

Defining Income

Excludable Forms of Money Income

Exemptions and Deductions

Rate Structure

Choice of Unit and the Marriage Tax

Taxes and Inflation

Treatment of International Income

State Income Taxes

Politics and Tax Reform

16.Personal Taxation and Behavior:

Labor Supply

Saving

Housing Decisions

Portfolio Composition

A Note on Politics and Elasticities

17.The Corporation Tax:

Why Tax Corporations?

Structure

Incidence and Excess Burden

Effects on Behavior

State Corporation Taxes

Taxation of Multinational Corporations

Corporation Tax Reform

18.Deficit Finance:

How Big Is the Debt?

The Burden of the Debt

To Tax or to Borrow?

19.Taxes on Consumption and Wealth:

Retail Sales Tax

Value-Added Tax

Hall-Rabushka Flat Tax

Cash-Flow Tax

Efficiency and Fairness of Personal Consumption Taxes

Income versus Consumption Taxation

Wealth Taxes

Estate and Gift Taxes



Part Five: Multigovernment Public Finance

20.Public Finance in a Federal System:

Background

Community Formation

The Tiebout Model

Optimal Federalism

Property Tax

Intergovernmental Grants

Appendix: Some Basic Microeconomics