This text strives to take its readers to the frontiers of research, whilst remaining accessible to undergraduate students. Drawing upon the latest research, the book discusses aspects of public finance, always drawing upon the links between economic analysis and topical political issues.

Part One: Introduction. 1. Introduction: Alternative Views of Government, Viewpoint of This Book, Appendix: Doing Research in Public Finance. 2. Tools of Positive Analysis: The Role of Theory, Methods of Empirical Analysis. 3. Tools of Normative Analysis: Welfare Economics, The Fundamental Theorem of Welfare Economics, Market Failure, Evaluation of Welfare Economics, Appendix: Consumer and Producer Surplus. Part Two: Analysis of Public Expenditure. 4. Public Goods: Public Goods Defined, Efficient Provision of Public Goods, The Privatization Debate, National Defense, Education, Public Goods and Public Choice, Appendix: Preference Revelation Mechanisms. 5. Externalities: The Nature of Externalities, Graphical Analysis, Private Responses to Externalities, 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, Background: Welfare as We Knew It, The 1996 Welfare Reform, The Earned Income Tax Credit, Supplemental Security Income, Medicaid, Food Stamps and Child Nutrition, Housing Assistance, Programs to Enhance Earnings, Have Welfare Programs Helped? 9. Social Insurance I: Social Security and Unemployment Insurance: Why Have Social Insurance?, Structure of Social Security, Effects of Economic Behavior, Long-term Stresses on Social Security, Social Security Reform, Unemployment Insurance. 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, Public Sector Discount Rate, Valuing Public Benefits and Costs, Some Pitfalls, Distribution Considerations, Uncertainty, An Application, Use by Government, Appendix: Calculating the Certainty Equivalent Value. Part Three: A Framework for Tax Analysis. 12. Taxation and Income Distribution: Tax Incidence, General Remarks, Partial Equilibrium Models, General Equilibrium Models. 13. Taxation and Efficiency: Excess Burden Defined, Excess Burden Measurement with Demand Curves, Differential Taxation of Inputs, Does Efficient Taxation Matter?, Appendix A: Formula for Excess Burden, Appendix B: Multiple Taxes and the Theory of Second Best. 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 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 Elasticity. 17. The Corporation Tax: Why Tax Corporations?, Structure, Incidence and Excess Burden, Effects of Behavior, State Corporation Taxes, Taxation of Multinational Corporations, Corporation Tax Reform. 18. Deficit Finance: The Size of 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 Federal System: Background, Community Formation, The Tiebout Model, Optimal Federalism, Property Tax, Intergovernmental Grants. Appendix: Some Basic Microeconomics.