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A Note on Earmarked Taxes

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  • Bingyuang Hsiung

    (National Taiwan University)

Abstract

It is argued in this note that earmarked taxes may be employed as a precautionary device to exert damage control so that problems in one budgetary item will not be spread to other budgetary items. The compartmentalization design of a submarine is a fitting metaphor. Theoretically, this consideration is complementary to, but more straightforward than, the arguments of Buchanan and Brennan (1978) and Buchanan (1991). Empirically, it is relevant to public policies such as national health insurance and social security, which not only incur substantial expenditures but also have the tendency to have explosive growth in expenditures. Although the compartmentalization property of the earmarking arrangement is logically sound, the actual working of the political process determines its ultimate relevance in reality.

Suggested Citation

  • Bingyuang Hsiung, 2001. "A Note on Earmarked Taxes," Public Finance Review, , vol. 29(3), pages 223-232, May.
    • Handle: RePEc:sae:pubfin:v:29:y:2001:i:3:p:223-232
    DOI: 10.1177/109114210102900303
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    References listed on IDEAS

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    1. Buchanan, James M, 1997. "The Balanced Budget Amendment: Clarifying the Arguments," Public Choice, Springer, vol. 90(1-4), pages 117-138, March.
    2. James M. Buchanan, 1963. "The Economics of Earmarked Taxes," Journal of Political Economy, University of Chicago Press, vol. 71(5), pages 457-457.
    3. David M. Newbery & Georgina Santos, 1999. "Road taxes, road user charges and earmarking," Fiscal Studies, Institute for Fiscal Studies, vol. 20(2), pages 103-132, June.
    4. Brennan, Geoffrey & Buchanan, James M., 1978. "Tax instruments as constraints on the disposition of public revenues," Journal of Public Economics, Elsevier, vol. 9(3), pages 301-318, June.
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