Public Finance Glossary

A budget in which government revenues equal expenditures, resulting in neither a deficit nor a surplus.

A fixed-income debt instrument issued by a government or corporation to raise funds. The issuer promises to pay periodic interest and return the principal at maturity.

The amount by which government spending exceeds revenue in a given fiscal period.

Government spending on long-term assets such as infrastructure, buildings, and equipment that provide benefits over many years.

A systematic approach to estimating the strengths and weaknesses of alternatives to determine the best option for achieving a public policy goal.

A reduction in private investment caused by increased government borrowing, which raises interest rates in the loanable funds market.

The loss of economic efficiency that occurs when the equilibrium outcome is not achieved, often caused by taxes, subsidies, or price controls.

A tax whose revenue is reserved for a specific government program or purpose rather than going into the general fund.

A side effect of an economic activity that affects uninvolved third parties, which can be positive or negative.

The financial relations among different levels of government, including the allocation of revenue sources and spending responsibilities.

The government's use of taxation and spending to influence the economy's performance.

The issue that arises when individuals can benefit from a public good without contributing to its cost.

The principle that taxpayers in similar economic situations should be treated equally by the tax system.

The final distribution of the economic burden of a tax among market participants.

A theoretical representation showing how tax revenue changes as the tax rate moves from 0% to 100%, suggesting a revenue-maximizing rate.

The amplified impact on national income resulting from an initial injection of spending, where each dollar spent generates more than one dollar of total economic activity.

A tax set equal to the marginal external cost of an activity, designed to correct for negative externalities.

A tax whose effective rate increases as the taxable amount increases.

The total accumulated borrowings of a government, resulting from past budget deficits.

A good that is both non-rivalrous and non-excludable, leading to market underprovision and justifying government intervention.

A tax that takes a proportionally larger share of income from lower-income earners.

The distribution of tax revenue among different levels of government, often from central to regional or local governments.

The profit a government earns by issuing currency, equal to the difference between the face value of money and its production cost.

Revenue losses attributable to special tax provisions such as deductions, exclusions, credits, and preferential rates that reduce tax liability for certain activities.

The principle that taxpayers with greater ability to pay should bear a larger tax burden.