The Theory of Taxation and Public Economics

Louis Kaplow brings innovative ideas to the difficult issues of income taxation and other fiscal instruments. The clarity of his writing and the novelty of his analysis make this book a pleasure to read. -- Martin Feldstein, Harvard University This clear and insightful examination of income taxation and its link to analyzing other government policies will be informative and valuable for students and researchers alike. -- Peter Diamond, "Massachusetts Institute of Technology" This rigorous book illuminates current policy issues in government taxation and spending, exposes the logical flaws in many common arguments, and nicely clarifies the interaction between equity and efficiency in taxes and transfers. It will serve well as a text and reference for advanced students of public economics, and it will also reward a close reading by their teachers. -- Joel Slemrod, University of Michigan Louis Kaplow's Theory of Taxation and Public Economics is a terrific text full of insight and new approaches to examining old issues in public finance. Kaplow, a brilliant economist with a great talent for exposition, looks at things from fresh angles and explains them in new ways. -- Laurence J. Kotlikoff, Boston University

Presents a unified conceptual framework for analyzing taxation. This book contains an analysis that generates novel results, including some that overturn long-standing conventional wisdom. By applying this common methodology to disparate subjects, it produces significant cross-fertilization and yields solutions to previously intractable problems.The Theory of Taxation and Public Economics presents a unified conceptual framework for analyzing taxation--the first to be systematically developed in several decades. An original treatment of the subject rather than a textbook synthesis, the book contains new analysis that generates novel results, including some that overturn long-standing conventional wisdom. This fresh approach should change thinking, research, and teaching for decades to come. Building on the work of James Mirrlees, Anthony Atkinson and Joseph Stiglitz, and subsequent researchers, and in the spirit of classics by A. C. Pigou, William Vickrey, and Richard Musgrave, this book steps back from particular lines of inquiry to consider the field as a whole, including the relationships among different fiscal instruments. Louis Kaplow puts forward a framework that makes it possible to rigorously examine both distributive and distortionary effects of particular policies despite their complex interactions with others. To do so, various reforms--ranging from commodity or estate and gift taxation to regulation and public goods provision--are combined with a distributively offsetting adjustment to the income tax. The resulting distribution-neutral reform package holds much constant while leaving in play the distinctive effects of the policy instrument under consideration. By applying this common methodology to disparate subjects, The Theory of Taxation and Public Economics produces significant cross-fertilization and yields solutions to previously intractable problems.