The Marginal Cost of Public Funds: Theory and Applications (The MIT Press)

A unified treatment of the marginal cost of public funds, covering both its theoretical foundations and how the MCF concept can be used to analyze tax policy issues.The marginal cost of public funds (MCF) measures the loss incurred by society in raising additional revenues to finance government spending. The MCF has emerged as one of the most important concepts in public economics; it is a key component in evaluations of tax reforms, public expenditure programs, and other public policies. The Marginal Cost of Public Funds provides a unified treatment of the MCF, carefully developing its theoretical foundations in a variety of contexts and describing its application to a wide range of policies—from excise taxes in Thailand to public sector borrowing in Canada and the United States. The Marginal Cost of Public Funds develops the basic theory of the MCF within the framework of public economics and shows how it is related to the traditional measures of the efficiency loss from distortionary taxation. The MCF concept is then applied to the major sources of revenues for governments—sales and excise taxes, taxes on labor income, taxes on the return to capital, public sector borrowing, and intergovernmental grants. This book will be an essential reference for economists and public policy analysts both in and out of government. Exercises and recommendations for further reading at the end of each main chapter highlight its usefulness as a supplementary text in advanced undergraduate or graduate courses in public economics. "The Marginal Cost of Public Funds: Theory and Applications develops the basic theory of the MCF within the framework of public economics and shows how it is related to the traditional measures of the efficiency loss from distortionary taxation. The MCF concept is then applied to the major sources of revenues for governments - sales and excise taxes, taxes on labor income, taxes on the return to capital, public sector borrowing and intergovernmental grants. This book will be and essential reference for economists and public policy analysis both in and out of government. Exercises and recommendations for further reading at the end of each main chapter highlight is usefulness as a supplementary text in advanced undergraduate or graduate courses in public economics."--Jacket Contents......Page 8 Preface......Page 12 1 Introduction......Page 16 2 Conceptual Foundations of the MCF......Page 26 3 The MCF for Commodity Taxes......Page 66 4 The MCFs for Excise Taxes in Thailand and the United Kingdom......Page 102 5 The MCF from Taxing Labor Income......Page 128 6 Applications of the MCF from Taxing Labor Income......Page 158 7 The MCF from Taxing the Return to Capital......Page 186 8 The MCF from Public Sector Borrowing......Page 220 9 The MCF in a Federal System of Government......Page 256 10 Applications of the MCF in Federations......Page 290 Notes......Page 318 References......Page 326 Index......Page 340 This text develops the basic theory of the marginal cost of public funds within the framework of public economics and shows how it is related to the traditional measures of the efficiency loss from distortionary taxation. The book includes exercises and recommendations for further reading at the end of each main chapter