THE HELLER SCHOOL FOR SOCIAL POLICY AND MANAGEMENT
BRANDEIS UNIVERSITY
Public Finance and Budgeting--HS 341a
Fall Semester – 2014
Robert Tannenwald
Thursday, 2:00 pm – 4:50 pm
Phone: 617-872-8813
Classroom: Schneider G-2
Office Hours: to be determined and by appointment.
E-mail: rtannen@brandeis.edu
Course Description: In 2013, federal, state, and local governments in the United States spent
almost $5.7 trillion, approximately $18,000 for every person living within its borders. Is this too
much or too little? Is public spending allocated properly among competing uses and levels of
government? Is it financed with the appropriate mix of taxes, fees, and borrowing? Is its
financial burden distributed fairly and efficiently? Has our public debt consigned future
generations to a much lower standard of living? What can governments do to stabilize their
fiscal future? In public debate, few issues are more complicated, confusing, and distorted—or
more timely.
There are no “right” answers to these questions—the answers depend on inherently subjective
assumptions, values, and priorities. One could devote several year-long courses wrestling with
these issues, not just a semester. However, this course will give you some facts and analytical
tools to help you form your own positions and to assert them effectively as a policymaker, policy
advocate, policy analyst, scholar, teacher, reporter, and/or citizen.
By the end of the course, you will have a broad knowledge of
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why and how governments intervene in the economy
the extent of their intervention
federal budgetary processes and principles
the major socioeconomic and political forces that have shaped them in recent decades
the means by which governments collect revenues to fulfill their responsibilities and
accomplish their goals
the strengths and weaknesses of the major taxes
their collective impact, along with spending programs, on the nation’s income
distribution.
the issues and differences that animate the current debate about debt and deficits at all
levels of government.
Sources of data not commonly known about or understood that will help you stand out.
You will be able to distinguish between “tax speak”—the buzz phrases and misleading
statements that too often characterize public debate about tax policy—and “tax talk”—carefully
reasoned discourse based on research and data.
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Course Reading: We will rely primarily on one textbook:
Harvey S. Rosen and Ted Gayer, Public Finance, 10th edition. McGraw-Hill Irwin (Boston:
2014).
Readings from this textbook will be supplemented with selections from a variety of sources.
Where relevant and insightful, current magazine and newspaper articles, not currently listed, will
be woven into reading assignments. Several pieces, identified with an asterisk, are optional,
supplementary readings that might be useful in researching papers or just interesting in their own
right.
Assignments and Grades: Course requirements will consist of three short papers
(approximately 1500-2500 words each). The first paper will count toward 20 percent of your
grade, the second will count toward 25 percent, and the third will count toward 35 percent. The
remaining 20 percent will be based on class participation.
Academic Integrity: Academic integrity is central to the mission of educational excellence at
Brandeis University. Each student is expected to turn in work completed independently, except
when assignments specifically authorize collaborative effort. It is not acceptable to use the
words or ideas of another person—be it a world-class philosophers or your lab partner – without
proper acknowledgement of that source. This means that you must use footnotes and quotation
marks to indicate the sources of any phrases, sentences, paragraphs or ideas found in published
volumes, on the internet, or created by another student. Violations of university policies on
academic integrity, described in Section 3 of Rights and Responsibilities, may result in failure in
the course or on the assignment, and could end in suspension from the University. If you are in
doubt about the instructions for any assignment in this course, you must ask for clarification.
Notice: If you have a documented disability on record at Brandeis University and require
accommodations, please bring it to the instructor’s attention prior to the second meeting of the
class. If you have any questions about this process, contact Mary Brooks, Disabilities
Coordinator for The Heller School at x 62816, or at maryeliz@brandeis.edu.
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August 28
A. Getting to know one another. Tell us a bit about yourself, your summer internship, and
what you’d like to get from this course.
B. The course in brief: an overview.
Why don’t unfettered private markets take care of all our economic needs and wants?
Why should government intervene to achieve this goal? Some theoretical considerations:
public goods, externalities.
Rosen and Gayer, Chapter 1, pp. 2-7; Chapter 4, pp. 54-56, 62-68; Chapter 5, pp.73-81.
Robert K. Triest, “The Economics of Subsidies for Community Development.” In Smart Subsidy
for Community Development, Federal Reserve Bank of Boston and the Aspen Institute (Boston:
July 2011), pp. 5-21. http://www.bostonfed.org/commdev/smart-subsidy/smart-subsidy.pdf.
*Mark R. Isaac, Kenneth F. McHugh, and Charles R. Plott, “Public Goods Provision in an
Experimental Environment,” Journal of Public Economics, vol. 26, no. 1 (Februa:ry 1985), pp.
51-74 (on LATTE).
*James Buchanan and Gordon Tullock, The Calculus of Consent: Logical Foundations of
Constitutional Democracy, Liberty Fund, Inc. (Indianopolis: 1999), chapter 4,5.
http://www.econlib.org. In search box, type “Calculus of Consent”. The website will then take
you to a list of books. The Calculus of Consent is the third book on the list. Click on the title, and
the book will appear in a form where you can click on each chapter. Also, see LATTE.
September 4
Questions for first paper will be handed out in class and put on Latte in the evening. Paper
will be due at midnight on Tuesday, October 7.
A. Why do private markets sometimes fail to satisfy our economic needs and wants?
(continued from the previous week). Assymetric information, adverse selection,
moral hazard, high fixed costs.
Jonathan Gruber, Public Finance and Public Policy, 4th ed., Worth Publishers (New York:
2013), pp. 328-334 (on LATTE).
Rosen and Gayer, pp. 176-192 (read Gruber selection first).
B. In a federal system, like that of the United States, which level of government should
do what, if economic efficiency is the primary goal?
We will address this question in part by evaluating federal general revenue sharing, a program in
effect during the 1970s, in which the federal government gave income tax revenues to state and
local governments “with no strings attached.”
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Rosen and Gayer, pp. 497-510.
Likina Nalwani, “Chinatown Residents Fear Being Pushed Out” Boston Globe, September 7,
2013) (on LATTE).
President Richard M. Nixon, Message to Congress on Revenue Sharing, the White House,
August 13, 1969. http://www.presidency.ucsb.edu/ws/index.php?pid=2200&st=&st1=.
Richard A. Musgrave and Mitchell Polinsky, “Revenue Sharing—A Critical Review,” in
Financing State and Local Governments, Conference 3, Federal Reserve Bank of Boston, June
14-16, 1970. http://www.bos.frb.org/economic/conf/conf3/conf3c.pdf.
Robert Tannenwald, “Devolution in the United States in Theory and Practice,” in Fiscal Rules,
Proceedings of a Conference Organized by the Central Bank of Italy, February 3, 2001, Perugia,
Italy, pp. 739-741.
https://www.bancaditalia.it/studiricerche/convegni/atti/fisc_rules/session4/737768_tannenwald.pdf.
*Rosen and Gayer, pp. 520-525.
*Chris Edwards, “Federal Aid to the States: Causes of Government Growth and Bureaucracy,”
Policy Analysis, May 22, 2007, No. 593, pp. 1-48. (on LATTE)
September 11
A. Which level of government should do what? (Continued from previous week.)
B. Application of normative principles of public economics to two public spending
programs: education and the Temporary Assistance to Needy Families (TANF).
Education
Rosen and Gayer, pp. 132-146, 289.
Labaree, David F. “Public Goods, Private Goods: the American Struggle Over Educational
Goals,” American Educational Research Journal, Vol. 34, No. 1 (Spring 1997), pp. 39-81.
http://www.stanford.edu/~dlabaree/publications/Public_Goods_Private_Goods.pdf.
“The Massachusetts Bay Colony,” The Quaqua Society, Salt Lake City, Utah.
http://www.quaqua.org/pilgrim.htm.
*United States General Accountability Office, “Federal Education Funding: Overview of K-12
and Early Childhood Education Funding. US Government Printing Office (Washington, DC:
January 2010). Appendix I, pp. 16-22. http://www.gao.gov/assets/310/300246.pdf.
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Temporary Assistance to Needy Families (TANF)
U.S. Department of Health and Human Services, “Temporary Assistance To Needy Families
(TANF) Overview,” http://www.hhs.gov/recovery/programs/tanf/tanf-overview.html.
Rosen and Gayer, pp. 275-285.
Liz Shott, “Policy Basics: An Introduction to TANF,” Center on Budget and Policy Priorities
(Washington, DC), December 4, 2012. http://www.cbpp.org/cms/index.cfm?fa=view&id=936.
“Chart Book: TANF at 18,” Center on Budget and Policy Priorities, August 22, 2014.
http://www.cbpp.org/files/8-22-12tanf.pdf.
Robert Rector, “Obama’s End Run on Welfare Reform, Part One: Understanding Workfare,”
American Heritage Foundation, September 19, 2012.
http://www.heritage.org/research/reports/2012/09/obamas-end-run-on-welfare-reform-part-oneunderstanding-workfare.
September 18
A. Continued discussion of TANF as viewed from principles of public economics
B. The current scope and mix of government spending in the United States
C. How has the scope and mix of government in the United States changed over time?
Scope and mix of government spending; historical trends
Charts from National Income and Product Accounts and from Rosen and Gayer (will be put on
LATTE).
“Policy Basics: Where Do Our Federal Tax Dollars Go?” Center on Budget and Policy Priorities,
Washington, DC, March 31, 2014. http://www.cbpp.org/cms/index.cfm?fa=view&id=1258.
“Policy Basics: Where Do Our State Tax Dollars Go?” Center on Budget and Policy Priorities,
Washington, DC, March 27, 2014. http://www.cbpp.org/cms/index.cfm?fa=view&id=2783.
September 23 (Tuesday, “Brandeis Thursday” No. 1)
A. Descriptive overview of U.S. spending (cont’d)
B. Introduction to taxation: basic principles and general background
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Introduction to taxation: basic principles and general background
Leonard E. Burman and Joel Slemrod, “The View from 30,000 Feet,” Taxes in America:
What Everyone Needs to Know, Oxford University Press (New York: 2013), pp. 3-20. (on
LATTE)
“The ITEP Guide to Fair State and Local Taxes,” Institute of Taxation and Economic Policy
(Washington, DC: 2011), Chapter 2. http://www.itep.org/pdf/guide2.pdf.
“Principles of Sound Tax Policy,” The Tax Foundation (Washington, DC).
http://taxfoundation.org/principles-sound-tax-policy.
Paul Guppy and Jason Mercier, “Principles of Taxation for Elected Officials,” Washington
Policy Center, (Seattle, Washington: 2008).
http://www.washingtonpolicy.org/sites/default/files/Principles%20of%20Taxation.pdf.
September 25
NO CLASS
October 2
A. Social security
B. Background of U.S. tax system, tax level and mix as a whole and at each level of
government.
C. The personal income tax and tax expenditures
Social Security
Guest Lecture: Robert Triest, Federal Reserve Bank of Boston
Steven Sass, Alicia H, Munnell, and Andrew Eschtruth, The Social Security Fix-It Book,
Center for Retirement Research at Boston College (Boston: 2009). (On LATTE).
Rosen and Gayer, pp. 222-250.
*John B. Williamson and Diane M. Watts-Roy, “Aging Boomers, Generational Equity,
and Framing the Debate About Social Security,” in Robert H. Hudson, ed. Boomer Bust?
Economic and Political Issues Graying Society. Praeger Publishers (Westport, CT: 2009).
https://www2.bc.edu/~jbw/documents/GEJWDW.pdf
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Descriptive background of U.S. tax system
Charts and Tables from National Income and Product Accounts and other sources (to be put on
LATTE)
Joel Slemrod and Jon Bakija, Taxing Ourselves: A Citizen’s Guide to the Debate Over Taxes,
|4th ed., The MIT Press (Cambridge, MA: 2008), Chapter 2, pp. 13-58 (available on line from
Goldfarb).
Eugene Steuerle, Contemporary U.S. Tax Policy, 2nd ed., Urban Institute Press (Washington,
DC: 2008), Chapter 1-2, (on LATTE).
*David Brunori, State Tax Policy, A Political Perspective, 2nd edition, Urban Institute Press
(Washington, D.C.: 2006), Chapters 1-2 (on LATTE).
The personal Income tax and tax expenditure budget
Rosen and Gayer, pp. 374-406.
U.S. Internal Revenue Service, “All Legal Same-Sex Marriages Will Be Recognized for Federal
Tax Purposes,” August 29, 2013. http://www.treasury.gov/press-center/pressreleases/Pages/jl2153.aspx.
The Tax Policy Center, “Tax Expenditures,” A Citizens’ Briefing Book for the Election and
Beyond, Urban Institute and Brookings Institution (Washington, D.C.)
http://www.taxpolicycenter.org/briefing-book/background/shelters/expenditures.cfm.
*Rosen and Gayer, pp. 407-429.
*Slemrod and Bakija, Taxing Ourselves: pp. 59-99 (on line from Goldfarb).
*U.S. Joint Committee on Taxation, Estimates of Federal Tax Expenditures for Fiscal Years
2012-2017. Government Accounting Printing Office (Washington, D.C.: February 1, 2013), 222. https://www.jct.gov/publications.html?func=startdown&id=4503.
October 9
NO CLASS
Second paper questions will be put on LATTE on October 9. Paper due at midnight on
November 11.
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October 13 (Brandeis “Thursday” No. 2)
A. The Property Tax
B. The Retail Sales and Excise Taxes
The property tax
Guest Lecture: Andrew Reschovsky, Lincoln Institute of Land Policy.
The Institute of Taxation and Economic Policy, The ITEP Guide to Fair State and Local Taxes
(Washington, DC: 2011), Chapter Four, pp. 25-34. http://www.itep.org/pdf/guide4.pdf.
Ronald Fisher, State and Local Public Finance: 3rd ed. (Thompson-Southwestern: 2007)
Chapters 13 and 14 (on LATTE).
Rosen and Gayer, pp. 511-518.
Andrew Reschovsky, “The Long-Term Future of the Property Tax,” Lincoln Institute of Land
Policy, Economic Perspectives on State and Local Taxes, December 13, 2013.
https://www.lincolninst.edu/education/910/Economic-Perspectives-on-State-and-Local-Taxes.
The sales and excise taxes
The Institute of Taxation and Economic Policy, The ITEP Guide, Chapter 3, pp. 11-24.
http://www.itep.org/pdf/guide3.pdf.
Fisher, Chapter 15 (on LATTE).
Michael Leachman and Michael Mazerov, “Four Steps to Moving State Sales Taxes Into the 21st
Century,” Center on Budget and Policy Priorities, July 9, 2013.
http://www.cbpp.org/cms/index.cfm?fa=view&id=3987.
Robert Tannenwald, “Is the Sales Tax Becoming Obsolete?” Panel on the Future of State and
Local Finance, Proceedings of State and Local Public Finance Amid Economic Turbulence,
reproduced in Thomas Garrett, ed. Regional Economic Development, vol. 6, no. 1, 2010 (Federal
Reserve Bank of St. Louis).
http://research.stlouisfed.org/publications/red/2010/01/PanelDisc.pdf.
*Donald Bruce, William F. Fox, and LeAnn Luna, “State and Local Sales Tax Revenue Losses
from Electronic Commerce,” The University of Tennessee (Knoxville, TN), April 13, 2009.
http://cber.bus.utk.edu/ecomm/ecom0409.pdf.
*William F. Fox and Matthew N. Murray, “Sales Taxation In a Global Economy,” in Taxing the
Hard-to-Tax, James Alm, Jorge Martinez, and Sally Wallace, eds., Elsevier Press (Amsterdam:
2004), pp. 221-224. http://aysps.gsu.edu/isp/files/ispwp0320.pdf.
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October 16
NO CLASS
October 23
A. Sales tax and the excise tax (continued)
B. Taxation, public spending, economic development, and economic competition
Taxation, public spending, economic development, and economic competition
Timothy Bartik, “What Should Michigan Be Doing to Promote Long-Run Economic
Development?” Upjohn Institute Working Paper 09-160, Kalamazoo, MI, W.E. Upjohn Institute
for Employment Research, November 2009. http://research.upjohn.org/up_workingpapers/160/
Louise Story, “As Corporations Seek Tax Deals, Governments Pay High Price,” New York
Times, December 2, 2012. http://www.nytimes.com/2012/12/02/us/how-local-taxpayersbankroll-corporations.html?pagewanted=all.
Michael Mazerov, “Academic Research Lacks Consensus on the Impact of State Tax Cuts on
Economic Growth,” Center on Budget and Policy Priorites (Washington, DC), June 17, 2013.
http://www.cbpp.org/cms/index.cfm?fa=view&id=3975.
Robert Tannenwald, “State Business Tax Climate: How Should It Be Measured and How
Important Is It?” New England Economic Review, January/February 1996 (on LATTE).
Scott Drenkard and Joseph Henchman, “State Business Tax Climate Index 2013,” Tax
Foundation, Washington, DC, Background Paper No. 64, October 2012.
http://taxfoundation.org/sites/taxfoundation.org/files/docs/2013_Index.pdf.
Robert Tannenwald, “Concerns about the Tax Foundation’s Business Tax Climate Index,”
State Tax Notes, February 25, 2013, 601 (on LATTE).
Jane G. Gravelle, International Corporate Tax Comparisons and Policy Implications,
Congressional Research Service (Washington, D.C.), December 28, 2012.
http://www.fas.org/sgp/crs/misc/R41743.pdf.
*Robert Tannenwald, John Shure, and Nicholas Johnson, “Tax Flight Is a Myth.” Center on
Budget and Policy Priorities,.August 4, 2011.
http://www.cbpp.org/cms/index.cfm?fa=view&id=3556.
*Arthur B. Laffer, Stephen Moore, and Jonathan Williams, Rich States, Poor States, 6th ed.:
ALEC-Laffer State Economic Competitiveness Index, American Legislative Exchange Council,
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(Arlington, VA: 2013). http://alec.org/docs/RSPS-6th-Edition.
*Daphne Kenyon, Adam Langley, and Bethany Paquin, “Rethinking Property Tax Incentives for
Business,” Lincoln Institute for Land Policy (Cambridge, MA: June 2012).
http://www.lincolninst.edu/pubs/2024_Rethinking-Property-Tax-Incentives-for-Business.
November 6
Growing inequality; governments’ role in exacerbating/mitigating it through taxation and
spending.
Emmanuel Saez, “Income Inequality: Evidence and Policy Implications,” Arrow Lecturer,
Stanford University, January 2013. http://elsa.berkeley.edu/~saez/lecture_saez_arrow.pdf.
Alan Cole, “Income Data is a Poor Measure of Inequality,” Tax Foundation, August 13, 2014,
http://taxfoundation.org/article/income-data-poor-measure-inequality.
Congressional Budget Office, The Distribution of Federal Spending and Taxes in 2006,
November 2013, pp. 27-37. http://www.cbo.gov/sites/default/files/cbofiles/attachments/44698Distribution_11-2013.pdf.
Institute on Taxation and Economic Policy (ITEP) Who Pays? A Distributional Analysis of the
Tax Systems in all 50 States, 4th edition. (Washington, DC): 2013, pp. 1-18.
http://www.itep.org/pdf/whopaysreport.pdf.
Ed Harris and Frank Sammartino, “Trends in the Distribution of Household Income between
1979 and 2009,” presentation to the National Bureau of Economic Research Conference on
Income and Wealth, Congressional Budget Office (Washington, D.C: August 2012).
http://www.cbo.gov/publication/43524.
Congressional Budget Office. “The Distribution of Household Income and Federal Taxes, 2010,”
December 2013. http://www.cbo.gov/publication/44604.
Jared Bernstein, “Inequality, Mobility, and the Policy Consequences They Imply,” New York
Times, July 22, 2013. http://economix.blogs.nytimes.com/2013/07/22/inequality-mobility-andthe-policy-agenda-they-imply/?src=xps.
*Rosen and Gayer, pp. 251-268; 296-300.
*An Overview of Growing Income Inequalities in OECD Countries: Main Findings, in “Divided
We Stand: Why Inequality Keeps Rising,” Organization for Economic Cooperation and
Development (Paris: 2011).
http://www.oecd.org/els/socialpoliciesanddata/49499779.pdf.
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*Katharine Bradbury, “Trends in U.S. Family Income Mobility, 1969-2006.” Federal Reserve
Bank of Boston, Federal Reserve Bank of Boston Working Paper, 11-10, October 20, 2011.
www.bostonfed.org/economic/wp/wp2011/wp1110.pdf
Second paper due on November 8 at midnight
Third paper questions will be put on Latte on November 9.
November 13
The Federal budget process
Center on Budget and Policy Priorities, “Policy Basics: the ABCs of the Federal Budget
Process,” January 3, 2011. http://www.cbpp.org/cms/?fa=view&id=155.
Michelle D. Christensen, “The Executive Budget Process: An Overview,” Congressional
Research Service, Library of Congress (Washington, D.C.: July 27, 2012).
http://fpc.state.gov/c18185.htm.
James V. Saturno, “The Congressional Budget Process, A Brief Overview,” Congressional
Research Service, May 3, 2011. http://fpc.state.gov/documents/organization/34649.pdf.
*Allen Schick, “The Federal Budget: Politics, Policy Process.” 3rd ed. Brookings Institution
(Washington, D.C.: 2007), Chapters 1-5 (will be put on LATTE, pending resolution of
copywright issues).
November 20
A. Federal budgetary debt and deficit
B. Implications of a default by the federal government
Federal budgetary debt and deficit
Rosen and Gayer, pp. 452-468.
The National Commission on Fiscal Responsibility and Reform, “The Moment of Truth,”
December 2010, pp. 1-17. (pp. 18-65 optional).
http://www.fiscalcommission.gov/news/moment-truth-report-national-commission-fiscalresponsibility-and-reform.
Congressional Budget Office, “The 2014 Long-Term Budget Outlook in 26 Slides,” July 16,
2014. http://www.cbo.gov/publication/45527.
*Congressional Budget Office, “The 2014 Long Term Budget Outlook” (full report, as opposed
to 26 slides). http://www.cbo.gov/publication/45471.
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* Stephen G Cecchetti, M.S. Mohanty and Fabrizio Zampolli, “The Future of Public Debt:
Prospects and Implications, Bank of International Settlements, Basel, Switzerland, Working
Paper No 300, March 2010. http://www.bis.org/publ/work300.pdf.
*Leonard E. Burman, Jeffrey A. Rohaly, Joseph Rosenberg, and Katherine C. Lim,
“Catastrophic Budget Failure,” National Tax Journal, vol. 63, no. 3, pp. 563-81, (September
2010). http://www.n http://www.bis.org/publ/work300.pdfanet.org/tax-resources/ntj-full-textarticles.html. (Search by volume date).
Consequences of default on federal debt
Projected Adverse Consequences--testimony of Daniel Marron of Brookings Institution,
September 18, 2013.
http://www.taxpolicycenter.org/UploadedPDF/904601-The-Costs-of-Debt-LimitBrinksmanship.pdf.
Matt Nesto, “Catastrophic Consequences of a U.S. Default Explained,” Yahoo.Finance.com,
October 4, 2013. http://finance.yahoo.com/blogs/breakout/u-treasury-default-catastrophicconsequences-explained-170230218.html.
Furth, Salim, “What Debt Crisis? A Default Primer for Governments,” Heritage Foundation
(Washington, DC), July 24, 2012. http://www.heritage.org/research/reports/2012/07/what-debtcrisis-a-default-primer-for-governments?ac=1.
Stan Collender, “Must Read Bruce Bartlett Debt Limit,” October 18, 2013.
http://capitalgainsandgames.com/blog/stan-collender/2778/must-read-bruce-bartlett-debt-limit.
November 27
NO CLASS
December 4
A. Our long-term state and local fiscal woes
B. Summing up
Long-Term State and Local Fiscal Problems
“Report of the State Budget Crisis Task Force,” New York, NY, July 2012.
http://www.statebudgetcrisis.org/wpcms/wp-content/images/Report-of-the-State-Budget-CrisisTask-Force-Full.pdf.
Joseph E. Stiglitz, “The Wrong Lessons from Detroit’s Bankruptcy,” New York Times, August
11, 2013. http://opinionator.blogs.nytimes.com/2013/08/11/the-wrong-lesson-from-detroits12
bankruptcy/?src=xps.
Summing Up
1. Ten most important points to take away from this course
2. Any lingering questions about final paper assignment
3. The latest fiscal developments in the news
4. Anything else on your mind before we break camp
Final paper due on last day of exam period, noon, December 18.
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