Chap022.ppt

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1、CHAPTER22PublicFinanceinaFederalSystemCopyright©2010bytheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/IrwinBackgroundFederalsystemFiscalfederalismCentralizationCentralizationratio=CentralgovernmentexpendituresTotalgovernmentexpendituresDistributionofAllU.S.ExpendituresbyGo

2、vernmentLevelCommunityFormationClub–voluntaryassociationofpeoplewhobandtogethertofinanceandsharesomebenefitOptimalClub(orcommunity)TheTieboutModelVotingwithyourfeetTiebout’sassumptionsGovernmentactivitiesgeneratenoexternalitiesIndividualsarecompletelymobilePeoplehaveperfectinformati

3、onwithrespecttoeachcommunity’spublicservicesandtaxesThereareenoughdifferentcommunitiessothateachindividualcanfindonewithpublicservicesmeetingherdemandsThecostperunitofpublicservicesisconstantsothatifthequantityofpublicservicesdoubles,thetotalcostalsodoublesPublicservicesarefinancedb

4、yaproportionalpropertytaxCommunitiescanenactexclusionaryzoninglaws—statutesthatprohibitcertainusesoflandTieboutandtheRealWorldCritiqueofTieboutEmpiricaltestsOptimalFederalismMacroeconomicfunctionsMicroeconomicfunctionsDisadvantagesofaDecentralizedSystemEfficiencyissuesExternalitiesL

5、ocalpublicgoodScaleeconomiesinprovisionofpublicgoodsInefficienttaxsystemsScaleeconomiesintaxcollectionEquityissuesAdvantagesofaDecentralizedSystemTailoringoutputstolocaltaxesFosteringintergovernmentalcompetitionExperimentationandinformationinlocallyprovidedgoodsandservicesImplicatio

6、nsPurelydecentralizedsystemscannotmaximizesocialwelfareDealingwithcommunityactivitiesthatcreatespillovereffectsthatarenotnationalinscopeCombinecommunitiesunderasingleregionalgovernmentPigouviantaxesandsubsidiesDivisionofresponsibilityinpublicgoodprovisionDistributionalgoalsandmobili

7、tyPublicEducationinaFederalSystemLocalcontrolofschoolsFinancingeducationthroughpropertytaxationFederalroleineducationPropertyTaxHowthepropertytaxworksAssessedvalueAssessmentratioCityEffectiveTaxRate*Newark2.03%Detroit2.01Atlanta1.75NewOrleans1.75Chicago1.58Charlotte1.20LosAngeles1.1

8、0NewYork.66*Figures