Texts: Public Finance and Public Policy, 3rd Ed., by Jonathan Gruber, 2010. You may purchase the online version of this text through CourseSmart.com for $74.95. Wall Street Journal – Sign up for at least a 15-week period.
Grades: Grades will be based on two exams (100 points each), one final (100 points), and assignments/attendance (100 points).
Midterms will be given on September 29 and November 8. The final exam for this class is on Friday, December 17 at 1:00 p.m.
If there is a borderline case (i.e. B/C) for your grade in the course, the determining factor will be your classroom participation and attendance.
Students with Disabilities: In compliance with university policy, students with disabilities who require academic and/or auxiliary accommodations for this course must contact the Office for Student Disability Services in Downing University Center, A-200. The phone number is 270.745.5004. Please DO NOT request accommodations directly from the professor or instructor without a letter of accommodation from the Office for Student Disability Services.
Missed Exams: Students who have a valid, university excused reason for missing an exam may take a make-up exam. I must be notified as soon as possible. Make-up exams are not possible after the exam has been graded and returned to the class.
Graduate Students: This course has a (G) component. Graduate students will include a research paper over a selected topic of interest from any of the following chapters: 6, 11-17, 21-24. This paper must include an application of theories or ideas presented in the chapter or in lecture to the most current status of that legislation. Include references from the past six months.
Course Description: A study of the economics of government spending and taxation. Among the topics covered are governments role in promoting widely accepted economic policy objectives; budgeting and benefit/cost analysis; effects and incidence of major taxes used in the U.S.; and issues in fiscal-federalism.
Course Outline:
We will cover as many of the following topics as the semester permits. Some topics may be moved up or back on the schedule if it becomes more current in the news. Special topics from chapters not listed here will be discussed as time or relevance permits.
Chapter 1: Introduction
The Four Questions of Public Finance
When should government intervene?
How might government intervene?
What are the effects of alternative interventions?
Why do governments do what they do?
Why Study Public Finance
Policy Debates over Social Security, Health Care, and Education
Chapter 4: Budget Analysis and Deficit Financing
Government budgeting
Measuring the Budgetary Position of the Government
Do current debts and deficits mean anything? A long-run perspective
Chapter 5: Externalities and Public Goods
Externality theory
Private-sector solutions
Public-sector solutions
Distinctions between price and quantity approaches
Chapter 7: Public Goods
Optimal provision of public goods
Private provision of public goods
Public provision of public goods
Chapter 8: Cost-Benefit Analysis
Measuring of costs of public projects
Measuring of benefits of public projects
Chapter 9: Political Economy
Unanimous consent on public goods levels
Mechanisms for aggregating individual preferences
Representative democracy
Public choice theory: The foundations of government failure
Chapter 10: State and Local Government Expenditures
Fiscal federalism
Optimal fiscal federalism
Redistribution across communities
Chapter 18: Taxation
Types of taxation
Structure of the individual income tax in the US
Measuring fairness of tax systems
Defining the income tax base
Chapter 19: The Equity Implications of Taxation: Tax Incidence
The three rules of tax incidence
Tax incidence extensions
General equilibrium tax incidence
The incidence of taxation in the United States
Chapter 20: Tax Inefficiencies and their Implications for Optimal Taxation
Taxation and economic efficiency
Optimal commodity taxation
Optimal income taxes
Tax-benefit linkages and the financing of social insurance programs
Chapter 25: Fundamental Tax Reform
Why fundamental tax reform
The politics and economics of tax reform
Consumption tax
The flat tax
Special Topics from Selected Remaining Topics as Time Permits
