Based on the theories of public choice, this paper explores the changes in the budgetary processes and resource allocation outcomes during the democratic transitions of Taiwan government. Generally speaking, after the lift of martial law, the budgetary process has shown a number of characteristics: (1) Individuals and interest groups are more willing to reveal their preferences and rent-seeking behaviors; (2) The Legislature Yuan has grown more independent; (3) The conflicts among political parties have increased: (4) The interaction of interest groups with bureaucrats and elected representatives builds up an iron triangle and money politics. (5) The demand for a greater financial autonomy in local governments has gone up. Consequently, through the period public expenditures and budget deficits grew rapidly. Interest payments and social security spending as a share of total expenditures increased dramatically while the share of defense expenditures declined steadily. This study also claims that people are often under the influence of fiscal illusions and politicians take this opportunity to propose excessive spending program, particularly the construction and social welfare programs. As a result, political processes are predicted to produce too much of governmental services. In order to reduce the degree of fiscal illusion caused by information asymmetry, the society should request for a greater transparency in budgetary information, and hopefully people will learn and mature gradually in the process of democratization. Currently politicians' individual preferences often dominate citizens' collective preferences in setting budgetary policies, so the quality of budgetary decisions has not improved as much as the political liberalization. The key is to strengthen citizens' surveillance power, using the available budget information as much as possible, to consistently express the demand for even greater openness and accountability in setting budget policies and in budget management practices.