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(共27张PPT)
PUBLIC FINANCE IN A FEDERAL SYSTEM
Chapter 22
Background
Federal system
Fiscal federalism
Centralization
Centralization ratio = Central government expenditures Total government expenditures
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Distribution of All U.S. Expenditures by Government Level
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Source: Figures for 1900 through 1980 are from Pommerehne [1977]. Figures after 1980 are computed from various editions of the US Bureau of the Census, Statistical Abstracts of the United States , and from US Bureau of the Census [2012b].
Community Formation
Club – voluntary association of people who band together to finance and share some benefit
Optimal Club (or community)
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The Tiebout Model
Voting with your feet
Tiebout’s assumptions
Government activities generate no externalities
Individuals are completely mobile
People have perfect information with respect to each community’s public services and taxes
There are enough different communities so that each individual can find one with public services meeting her demands
The cost per unit of public services is constant so that if the quantity of public services doubles, the total cost also doubles
Public services are financed by a proportional property tax
Communities can enact exclusionary zoning laws—statutes that prohibit certain uses of land
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Tiebout and the Real World
Critique of Tiebout
Empirical tests
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Optimal Federalism
What is the optimal allocation of economic responsibilities among levels of government
Macroeconomic functions
Microeconomic functions
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Disadvantages of a Decentralized System
Efficiency issues
Externalities
Local public good
Scale economies in provision of public goods
Inefficient tax systems
Scale economies in tax collection
Equity issues
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Advantages of a Decentralized System
Tailoring outputs to local taxes
Fostering intergovernmental competition
Experimentation and information in locally provided goods and services
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Implications
Purely decentralized systems cannot maximize social welfare
Dealing with community activities that create spillover effects that are not national in scope
Combine communities under a single regional government
Pigouvian taxes and subsidies
Division of responsibility in public good provision
Distributional goals and mobility
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Public Education in a Federal System
Local control of schools
Financing education through property taxation
Federal role in education
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Property Tax
How the property tax works
Assessed value
Assessment ratio
Residential Property Tax Rates
(selected cities)
City Effective Tax Rate (%)
Indianapolis 2.75
Detroit 2.11
Jackson 1.70
New Orleans 1.40
Oklahoma City 1.25
Boston 1.06
Seattle 0.79
New York 0.62
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Incidence and Efficiency Effects – The Traditional View – Tax on Land
Acres of land
Rent per acre of land
SL
DL
P0L
DL’
PnL
PsL = P0L
Price received by landowners falls by amount of the tax
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Incidence and Efficiency Effects – The Traditional View – Tax on Land
Tax capitalized into price of land
Land not fixed in supply
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Incidence and Efficiency Effects – The Traditional View – Tax on Structures
Number of structures per year
Price per structure
SB
DB
P0B
DB’
PnL
PnB = P0B
B0
B1
PgB
Price paid by tenants increases by full amount of the tax
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Summary and Implications of the Traditional View
Progressivity
Land tax
Structures tax
Empirical evidence
Measuring income
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The New View: Property Tax as a Capital Tax
Partial equilibrium versus general equilibrium
General Tax effect
Excise Tax effects
Long-run effects
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Property Tax as a User Fee
The notion of the incidence of the property tax is meaningless
The property tax creates no excess burden
Federal income tax subsidizes consumption of local public services for individuals who itemize
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Reconciling the Three Views
New view: Eliminating all property taxes and replacing them with a national sales tax
Traditional view: Lowering property tax rate and making up revenue from local sales tax
User fee view: Taxes and benefits jointly changed and people are sufficiently mobile
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Why Do People Hate the Property Tax So Much
Property tax levied on estimated value
Property tax highly visible
Property tax perceived as being regressive
Circuit breakers
Property tax easier to attack
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Ideas for Improving the Property Tax
Improve assessment procedures
Personal net worth tax
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Intergovernmental Grants
Source: Computed from Economic Report of the President, 2012 [pp. 320, 415].
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Total Grants
Grants as %
Grants as %
Billions of
Of Total Federal
of State & Local
Year
2010 $
Outlays
Spending
1970
88
9.6
17.1
1980
168
12.3
21.9
1990
171
8.8
15.2
2000
309
13.2
19.3
2010
532
14.4
25.4
Possible explanation for growth: Mismatch Theory
Conditional (Categorical) Grants
G1
c1
E1
Units of public good (G) per year
Consumption (c) per year
A
B
Matching Grants
R
G2
c2
E2
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Conditional (Categorical) Grants
G1
c1
E1
Units of public good (G) per year
Consumption (c) per year
A
B
Matching Closed-Ended Grants
R
G3
c3
E3
D
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Conditional (Categorical) Grants
G1
c1
E1
Units of public good (G) per year
Consumption (c) per year
A
B
Non-matching Grants
R
G2
c4
E4
H
J
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Unconditional Grants
Revenue sharing
Flypaper Effect
Whose indifference curves
Median voter theorem
Flypaper effect
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Chapter 22 Summary
In a federal system of government, different governments provide difference services, although advantages and disadvantages of centralized government exist
The club model of community formation indicates that community size and quantity of public goods depend on tastes
According to the Tiebout model, a Pareto efficient allocation of public goods is possible under certain conditions through “voting with your feet”
The property tax is an important revenue source for state and local governments
Various types of grants from the federal and state government are other sources of revenue for state and local governments
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