Fiscal economics concerns the effect of government financial activities
on the private sector of the economy. The financial devices employed by the government consist of expenditures for services and for currently produced goods and real resources, the making of transfer payments such as subsidies, the receiving of transfer payments such as taxes, and the dealing in the old real assets and claims, including its own debt. More succinctly, one may think of government financial activities as purchases and sales of services, goods, and claims, and positive and negative transfer payments. Theoretically any financial action falls into one or both of these two classes. Debt operations, which at first glance may seem to have been left out, are covered because borrowing takes place by the sale of securities and lending by the purchase or retirement of debt.
Scope of the Study: This study emphasizes the implications of government transfers, both positive and negative. Positive transfer payments such as subsidies or interest paid on government debt provide cash to private groups. The method of payment may also attach certain conditions for the qualification of those who are to receive such payments, and these qualifications may effect decisions concerning the manner of employing resources. Similar observations apply to negative transfer payments which, In the contemporary world, consist mainly of taxes. Taxes are financial devices which, to the extent that they have a yield, remove cash from private hands. They too may induce people to behave differently in the management of resources. This “incentive” aspect of a tax or subsidy device depends upon the precise definition of the tax or subsidy base and the rate structure. It is this aspect of taxation that provides the basis for distinguishing classes of taxes.
Fiscal economics concerns the effect of government financial activities on the private sector of the economy. The financial devices employed by the government consist of expenditures for services and for currently produced goods and real resources, the making of transfer payments such as subsidies, the receiving of transfer payments such as taxes, and the dealing in the old real assets and claims, including its own debt. More succinctly, one may think of government financial activities as purchases and sales of services, goods, and claims, and positive and negative transfer payments. Theoretically any financial action falls into one or both of these two classes. Debt operations, which at first glance may seem to have been left out, are covered because borrowing takes place by the sale of securities and lending by the purchase or retirement of debt.Scope of the Study: This study emphasizes the implications of government transfers, both positive and negative. Positive transfer payments such as subsidies or interest paid on government debt provide cash to private groups. The method of payment may also attach certain conditions for the qualification of those who are to receive such payments, and these qualifications may effect decisions concerning the manner of employing resources. Similar observations apply to negative transfer payments which, In the contemporary world, consist mainly of taxes. Taxes are financial devices which, to the extent that they have a yield, remove cash from private hands. They too may induce people to behave differently in the management of resources. This “incentive” aspect of a tax or subsidy device depends upon the precise definition of the tax or subsidy base and the rate structure. It is this aspect of taxation that provides the basis for distinguishing classes of taxes.
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