Econ 127, "Public Finance: Taxation"


Fred E. Foldvary, Fall 2005

Santa Clara University

Class web site:

MWF, 9:15-10:20 AM , Kenna 310, 5 units, #18213

e-mail: [email protected], subject line: econ 127

Office hours: Monday, Wednesday, & Friday 10:30-11 AM and by appointment

Telephone: office 408/554-6968; home 510/843-0248. Office: Kenna 209.

Please do not call my home telephone after 10 PM.

Fax (econ dept.) 408/554-2331. Mailbox is in the Department of Economics, Kenna 300.

Please do not email me any attachments or problem sets.

If you cannot come to class, place written assignments in my mailbox at the Dept. Of Economics, Kenna 3rd floor. Please do not put papers under my office door or deliver papers at my office.

Course overview:

Econ 127 analyzes various tax policies and their effect on the economy, government borrowing, budgets, and the types and effects of expenditures. Public finance will be treated broadly to also include the revenues and spending for public goods by homeowner associations and proprietary communities such as hotels.

The objectives of the course:

The aim of this course is to provide you with a long-term knowledge of the basic principles and theory of public finance, and to be able to apply these concepts to the social issues and problems confronting us today.

Biographical sketch:

Fred Foldvary received his B.A. from the University of California at Berkeley, and his M.A. and Ph.D. in economics from George Mason University, Virginia. He also has taught economics at Santa Clara University and in Latvia, Virginia Tech, CSU East Bay, John F. Kennedy University, and University of California Extension.

Dr. Foldvary is the author of Public Goods and Private Communities and Dictionary of Free-Market Economics. He edited Beyond Neoclassical Economics and co-edited The Half-Life of Policy Rationales. His areas of research include public finance, business cycles, governance theory, economic philosophy, and the economics of real estate.

Student progress.

I will occasionally post student scores on the class web site using student numbers. You will be assigned a number, and this will be shown rather than your name. I am concerned with your success and progress, and will let you know your status on request.

Grades and the criteria for evaluating your work.

Essays are graded by the following criteria:

1) presentation (language, legibility, organization);

2) how completely it covers the topics;

3) focus (avoiding irrelevancies and redundancies);

4) knowledge of the relevant theory, facts, and terms, and defining of key terms;

5) warranting (by clear, sound, organized reasoning) and citing of sources.

The maximum points for each category are:

First midterm exam: 144 points (24 questions)

Second midterm exam: 144 points "

Third midterm exam: 144 points "

Final exam: 288 points (48 questions)

Quizzes, problem sets 210 points

Project 50 points

Conversation, oral exam 20 points

total = 1000 points.

The letter grading is as follows.

A : 921-999, A-: 900-920, B+: 880-899, B : 821-879; B-: 800-820; C+: 780-799,

C : 721-779, C-: 700-720; D+: 680-699; D : 621-679; D-: 600-620; F : 0-599

There will be an conversation and oral exam in my office. You don't need to prepare for it. It will usually last about 5 minutes. These conversations will help me get to know you better and see how you are developing your economic understanding.

All problem sets, quizzes, and exams are open book and open note. The purpose is to test your ability to analyze rather than memorize. But there must be no talking during an exam. All homework must be your own work. In case there is any cheating, copying, or other dishonesty in the exams or assignments, this is a serious violation of university rules and can result in a zero for the assignment or possibly an F for the course, and will be reported to the department, school, or university administration.


You are expected to attend all the classes. To obtain full credit for problem sets and exams, if you are unable to attend class, you must submit a written assignment by placing it in my mailbox before the class time of the date due. If you leave town, contact me prior to leaving about your assignments. Without advance notice or a warranted reason, submissions after the class date for which it is due will be reduced by 20% of the total maximum score. After the following class day, the grade will be zero.

Make-up midterms must be scheduled before the midterm date unless there is some emergency.

Reading assignments

Harvey S. Rosen, Public Finance, 7th edition

Kenneth Wenzer, ed. Land-Value Taxation.

Week 1. Sept. 19+

The scope of public finance. The public financing of the public goods of a hotel.

Rosen: Chapters 1-3. Tools of analysis.

Rosen: Chapter 4. Public goods. Territorial goods.

Foldvary: on public goods.

The "Henry George theorem."

Week 2. Sept. 16+

Rosen: Chapter 5: Externalities. Marginal-cost charges for highways, parking.

Rosen: Chapter 6: Political Economy

The real property tax in California. Property records in Santa Clara County.

Wenzer: Chapter 2, William Vickrey, "A Modern Theory of Land-Value Taxation."

Wenzer: Chapter 3, William Vickrey, "Simplification, Progression, and a Level Playing


Week 3. Oct. 3+

first midterm

Oct. 5, CSI: Sharon Presley, Daly Science, "American Women Resisters to Authority"

Wenzer: Chapter 4, Vickrey, "Henry George, Economies of Scale, and Land Taxation"

Wenzer: Chapter 5, William Vickrey, "Propositions Relating to Site-Value Taxation."

Wenzer: Chapter 6, Harry Gunnison Brown, "Land Speculation and Land-Value

Taxation." The case of Kiaow-Chow, China.

Wenzer: Chapter 7, Mason Gaffney, "Tax Reform to Release Land."

Wenzer: Chapter 9, T. Nicolaus Tideman, "Taxing Land is Better than Neutral."

Week 4. Oct. 10+

Wenzer: Chapter 14, Fred E. Foldvary, "The Ethics of Rent."

Wenzer: Chapter 15, Hanno T. Beck, "Land-Value Taxation and Ecological-Tax

Reform." Taxing pollution and resource depletion; severance taxes.

Wenzer: Chapter 20, Jerome F. Heavey, "The Single-Tax Fiscal System."

Week 5. Oct. 17+

second midterm

Rosen, Chapter 7, Income Redistribution

Rosen, Chapter 8, Expenditure Programs for the Poor

Rosen, Chapters 9-10, Social Insurance and payroll taxes.

Week 6. Oct. 24+

Oct. 26, CSI: Marcus Cole, Brass Rail, "The Social Costs of Behavioral Law &


Rosen, Chapter 11, Cost-Benefit Analysis.

Rosen, Chapter 12, Taxation and Income Distribution

Rosen, Chapter 13, Taxation and Efficiency; the social costs of taxation

Taxation by regulation and litigation.

Lecture on Tideman: Measuring the deadweight losses (excess burdens).

Rosen, Chapter 14, Efficient and Equitable Taxation.

Demand revelation and the Clarke Tax

Week 7. Oct. 31+

Taxation and the U.S. Constitution

Rosen, Chapter 15, The Personal Income Tax.

Rosen, Chapter 16, Personal taxation and behavior. "Sin taxes."

Rosen, Chapter 17, The Corporate income tax

California's income taxes.

Week 8. Nov. 7+

Rosen, Chapter 18, Deficit finance.

Rosen, Chapter 19, Taxes on consumption and wealth.

Federal excise taxes. Estate taxes. Sales taxes in California. Value-added taxes.

Week 9. Nov. 14+

third midterm

Nov. 16, CSI: Jeff Riggenbach, Brass Rail, Drugs and the Mass Media

Rosen, Chapter 20, Public Finance in a Federal System. Fiscal federalism.

Municipal Public Finance. User fees. Vouchers. Tax substitution.

Public choice, clubs, and governance.

Projecs are due.

Thanksgiving Week.

Week 10. Nov. 28+

The growth of the government sector.

The shrinkage of the government sector: public goods of private communities.

Issues in tax reform. Constitutional economics.

International aspects of taxation.


Final exam: Wednesday, Dec 7, 9:10 AM - 12:10 PM.