We consider an image coder that uses a multiscale decomposition. An image is first whitened, and then decomposed into subimages using a wavelet decomposition. A bit allocation algorithm is employed that assigns various rates to the subimages according to the power spectral density of the original image. Based on the bit assignments, scalar quantizers are used for encoding the coefficients. To improve the performance of this coder, we consider a bit allocation procedure that takes the response of the human visual system into account. Finally, we introduce a spatial partition on top of the multiscale decomposition, resulting in a substantial improvement to the image quality.