The hypothecation of a tax (also known as the ring fencing or ear marking of a tax) is the dedication of the revenue from a specific tax for a particular expenditure purpose. Hypothecation is the pledging of assets.
- Accountability and trust
- Public support
- Protecting resources
A 2012 report by the Mercatus Center found that dedicating tax revenues to specific expenditures can be used by policymakers to mask increases in total government spending, and showed empirically that hypothecated taxes tend to result in an increase in total government size but have little effect on the expenditures to which they are tied.
- Examples of hypothecated taxation include the gasoline tax in the US, a tax on gasoline dedicated to the funding of transport infrastructure.
- Another example in many European countries is a television licence. There, all users of television sets are obliged to pay the government an annual fee to use their televisions. The proceeds of the levy are then used to fund public broadcasting.
- Various Chinese imperial armed forces including the Beiyang Army were assigned the customs revenues of their region.
- Motivation, Agency, and Public Policy
- Benefit principle
- Bundling (public choice)
- Consumer sovereignty
- Tax choice
- The Other Invisible Hand
- User charge
- British House of Commons: Hypothecated taxation
- Hypothecation of tax revenue for health
- The Effects of Dedicating Tax Revenues
- Buchanan, James M. – The Economics of Earmarked Taxes 1963
- Le Grand, Julian - Motivation, Agency, and Public Policy: Of Knights and Knaves, Pawns and Queens 2003
|This tax-related article is a stub. You can help Wikipedia by expanding it.|