Shows how familiar partial equilibrium analysis of a subsidy can be extended to take account of the marginal welfare costs of raising the necessary tax revenue. Focuses on identifying the marginal social cost (MSC) of using the subsidy to expand output which, in conjunction with marginal social...

Develops a theoretical analysis of the responsiveness of tax revenue to a change in tax rates on labor income. Finds that tax revenue is likely to be less responsive to higher tax rates than previous estimates suggest.

Estimates effects of the EITC on total disposable income received by families. For two-thirds of EITC recipients in the phase-out range, the credit operates like a negative income tax and provides a disincentive to work.

Louis Kaplow argues in his recent paper that there are a wide variety of situations in which the income tax financing of a public good is nondistortionary. Specifically, this occurs when the additional tax liability of each person equals that person's additional benefit from the public good. We...