Public finance
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Taxation
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Taxation by country Australia British Virgin Islands Canada China Colombia France Germany Hong Kong India Indonesia Ireland Netherlands New Zealand Peru Russia Singapore Tanzania United Kingdom United States European Union  v • d • e  Tax rates around the world Tax revenue as % of GDP The balance of payments is a measure of the payments that flow from one exports and imports of goods, services, and financial capital, as well financial transfers. ... Déficit is a Mexican feature film, the debut of Gael García Bernal as a director. ... This article does not cite any references or sources. ... Image File history File linksMetadata Size of this preview: 800 × 600 pixelsFull resolution (2816 × 2112 pixel, file size: 2. ... Finance studies and addresses the ways in which individuals, businesses, and organizations raise, allocate, and use monetary resources over time, taking into account the risks entailed in their projects. ... A tax is an involuntary fee paid by individuals or businesses to a state, or to functional equivalents of a state, including tribes, secessionist movements or revolutionary movements. ... A tax is an involuntary fee paid by individuals or businesses to a state, or to functional equivalents of a state, including tribes, secessionist movements or revolutionary movements. ... Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        An income tax is a tax levied on the financial income... This article is the current Taxation Collaboration of the Month. ... For all other forms of taxation, see tax Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        A capital gains... Stamp duty is a form of tax that is levied on documents. ... Land value taxation (LVT), or site value taxation, is the policy of raising state revenues by charging each landholder a portion of the value of a site or parcel of land that would exist even if that site had no improvements. ... A sales tax is a consumption tax charged at the point of purchase for certain goods and services. ... Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Gold standard Fiscal policy Spending   Deficit   Debt Policy-mix Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Regulation Banking Fractional-reserve Full-reserve   Free banking Islamic... A flat tax, also called a proportional tax, is a system that taxes all entities in a class (typically either citizens or corporations) at the same rate (as a proportion on income), as opposed to a graduated, or progressive, scheme. ... The tax, tariff and trade laws of a political region, state or trade bloc determine which forms of consumption and production tend to be encouraged or discouraged. ... A tax haven is a place where certain taxes are levied at a low rate or not at all. ... First discussed by the Physiocrats in France, tax incidence is the analysis of the effect of a particular tax on the distribution of economic welfare. ... A tax (also known as a dutyor Zakat in islamic economics) is a charge or other levy imposed on an individual or a legal entity by a state or a functional equivalent of a state (e. ... A flat tax, also called a proportional tax, is a system that taxes all entities in a class (typically either citizens or corporations) at the same rate (as a proportion of income), as opposed to a graduated, or progressive, scheme. ... Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        A progressive tax is a tax imposed so that the effective... Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        A regressive tax is a tax imposed so that the tax... Tax advantage refers to the economic bonus which applies to certain accounts or investments that are, by statute, tax-reduced, tax-deferred, or tax-free. ... Image File history File links This is a lossless scalable vector image. ... Image File history File links Flag_of_the_British_Virgin_Islands. ... Image File history File links This is a lossless scalable vector image. ... Image File history File links Flag_of_the_Peoples_Republic_of_China. ... Image File history File links Flag_of_Colombia. ... Image File history File links This is a lossless scalable vector image. ... Image File history File links Flag_of_Germany. ... 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This article is the current Taxation Collaboration of the Month. ... Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        Comparison of tax rates around the world is a difficult and... This table lists OECD countries by total tax revenue as percentage of GDP (as of 2005). ...
Economic policy
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Fiscal policy Spending  ·   Deficit  ·   Debt
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A budget deficit occurs when an entity (often a government) spends more money than it takes in. The opposite of a budget deficit is a budget surplus. Debt is essentially an accumulated flow of deficits. In other words, a deficit is a flow and debt is a stock. Not to be confused with Political economy. ... Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        Monetary policy is the process by which the government, central bank... In macroeconomics, money supply (monetary aggregates, money stock) is the quantity of currency and money in bank accounts in the hands of the non-bank public available within the economy to purchase goods, services, and securities. ... For other uses, see Gold standard (disambiguation). ... Fiscal policy is the economic term that defines the set of principles and decisions of a government in setting the level of public expenditure and how that expenditure is funded. ... Government spending or government expenditure consists of government purchases, which can be financed by seigniorage (the creation of money for government funding, at a heavy price of high inflation and other possibly devastating consequences), taxes, or government borrowing. ... Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        Government debt (also known as public debt or national debt) is... This article does not cite any references or sources. ... Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        For other uses of this word, see tariff (disambiguation). ... A trade pact is a wide ranging tax, tariff and trade pact that usually also includes investment guarantees. ... Finance studies and addresses the ways in which individuals, businesses, and organizations raise, allocate, and use monetary resources over time, taking into account the risks entailed in their projects. ... This article does not cite any references or sources. ... There are two basic financial market participant catagories, Investor vs. ... Domestic credit to private sector in 2005 Corporate finance is an area of finance dealing with the financial decisions corporations make and the tools and analysis used to make these decisions. ... Personal finance is the application of the principles of finance to the monetary decisions of an individual or family unit. ... This article does not cite any references or sources. ... For other uses, see Bank (disambiguation). ... Fractional-reserve banking refers to a financial system in which some fraction of the deposits can be used to finance profitable but illiquid investments. ... Full-reserve banking is a theoretically conceivable banking practice in which all deposits, banknotes, and notes in a financial system would be backed up by assets with a store of value. ... Please wikify (format) this article or section as suggested in the Guide to layout and the Manual of Style. ... Islamic banking refers to a system of banking or banking activity that is consistent with Islamic law (Sharia) principles and guided by Islamic economics. ... This article is about the concept of an entity. ... For other uses, see Money (disambiguation). ... Surplus means the quantity left over, after conducting an activity; the quantity which has not been used up, and can refer to: budget surplus, the opposite of a budget deficit economic surplus Surplus product or surplus value in Marxian economics physical surplus in the economic theory of Piero Sraffa Operating... A stock in business and social accounting refers to the value of an asset at a balance date (or point in time), while a flow refers to the total value of transactions (sales or purchases) during an accounting period. ... A stock in business and social accounting refers to the value of an asset at a balance date (or point in time), while a flow refers to the total value of transactions (sales or purchases) during an accounting period. ...

An accumulated deficit over several years (or centuries) is referred to as the government debt. Government debt is usually financed by borrowing, although if a government's debt is denominated in its own currency it can print new currency to pay debts. Monetizing debts, however, can cause rapid inflation if done on a large scale. Governments can also sell assets to pay off debt. Most governments finance their debts by issuing long-term government bonds or shorter term notes and bills. Many governments use auctions to sell government bonds. Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        Government debt (also known as public debt or national debt) is... A government bond is a bond issued by a national government denominated in the countrys own currency. ...

Governments usually must pay interest on what they have borrowed. Governments reduce debt when their revenues exceed their current expenditures and interest costs. Otherwise, government debt increases, requiring the issue of new government bonds or other means of financing debt, such as asset sales. A government bond is a bond issued by a national government denominated in the countrys own currency. ...

According to Keynesian economic theories, running a fiscal deficit and increasing government debt can stimulate economic activity. Fiscal policy is the economic term that defines the set of principles and decisions of a government in setting the level of public expenditure and how that expenditure is funded. ...

Primary deficit, total deficit, and debt

Main article: Primary deficit

The government's deficit can be measured with or without including the interest it pays on its debt. The primary deficit is defined as the difference between current government spending and total current revenue from all types of taxes. The total deficit (which is often just called the 'deficit') is spending, plus interest payments on the debt, minus tax revenues.^[1] Government spending or government expenditure consists of government purchases, which can be financed by seigniorage (the creation of money for government funding, at a heavy price of high inflation and other possibly devastating consequences), taxes, or government borrowing. ... “Taxes” redirects here. ...

Therefore, if G_t is government spending and T_t is tax revenue, then

If D_{t − 1} is last year's debt, and r is the interest rate, then

Finally, this year's debt can be calculated from last year's debt and this year's total deficit:

Economic trends can influence the growth or shrinkage of fiscal deficits in several ways. Increased levels of economic activity generally lead to higher tax revenues, while government expenditures often increase during economic downturns because of higher outlays for social insurance programs such as unemployment benefits. Changes in tax rates, tax enforcement policies, levels of social benefits, and other government policy decisions can also have major effects on public debt. For some countries, such as Norway, Russia, and members of the Organization of Petroleum Exporting Countries (OPEC), oil and gas receipts play a major role in public finances.

Inflation reduces the real value of accumulated debt. If investors anticipate future inflation, however, they will demand higher interest rates on government debt, making public borrowing more expensive.

Structural deficits, cyclical deficits, and the fiscal gap

Main article: Structural deficit

A government deficit can be thought of as consisting of two elements, structural and cyclical. Structural deficit forms part of the public sector deficit. ...

At the lowest point in the business cycle, there is a high level of unemployment. This means that tax revenues are low and expenditure (e.g. on social security) high. Conversely, at the peak of the cycle, unemployment is low, increasing tax revenue and decreasing social security spending. The additional borrowing required at the low point of the cycle is the cyclical deficit. By definition, the cyclical deficit will be entirely repaid by a cyclical surplus at the peak of the cycle. The business cycle or economic cycle refers to the fluctuations of economic activity about its long term growth trend. ... CIA figures for world unemployment rates, 2006 Unemployment is the state in which a person is without work, available to work, and is currently seeking work. ... Structural deficit forms part of the public sector deficit. ...

The structural deficit is the deficit that remains across the business cycle, because the general level of government spending is too high for prevailing tax levels. The observed total budget deficit is equal to the sum of the structural deficit with the cyclical deficit or surplus. Structural deficit forms part of the public sector deficit. ...

The idea of cyclical vs. structural deficits has come under criticism by those economists who believe that the business cycle is too difficult to measure to make cyclical analysis worthwhile.

A concept related to the structural deficit is the fiscal gap, defined by economists Alan Auerbach and Lawrence Kotlikoff. It refers to the shortfall in government revenues over the very long term.^[2] It includes not only the structural deficit at a given point in time, but also the difference between promised future government commitments, such as health and retirement spending, and planned future tax revenues. Since the elderly population is growing much faster than the young population in many countries, many economists argue that these countries have important fiscal gaps, beyond what can be seen from their deficits alone.

National budget deficits (2004)

This data is from 2004, the year of the largest US federal deficit on record, totalling $552 billion (the figure does not include money borrowed from the Social Security trust fund — in other words, the fiscal gap is larger than this). This article is about budget deficits. ...

The deficits for any given period can be easily found on the website for the US Bureau of the Public Debt, now under treasury.gov. (Data from CIA Factbook and List of countries by GDP (nominal), senate.gov, nasbo.org) World map of GDP (Nominal and PPP). ...

Early deficits

Before the invention of bonds, the deficit could only be financed with loans from private investors or other countries. A prominent example of this was the Rothschild dynasty in the late 18th and 19th century, though there were many earlier examples. For alternative meanings, see bond (a disambiguation page). ... Mayer Amschel Rothschild (1744-1812) Mayer Amschel Rothschild (February 23, 1744 – September 19, 1812) was the founder of the Rothschild family banking empire that would become one of the most successful business families in history. ...

These loans became popular when private financiers had amassed enough capital to provide them, and when governments were no longer able to simply print money, with consequent inflation, to finance their spending. For other uses, see Money (disambiguation). ...

However, large long-term loans had a high element of risk for the lender and consequently gave high interest rates. Governments later tried to marketize their debts by issuing bonds that were payable to the bearer, rather than the original purchaser. This meant that someone who lent the state money could sell on the debt to someone else, reducing the risks involved and reducing the overall interest rates. Examples of this are British Consols and American Treasury bill bonds. Consols (short for consolidated annuities[]) are a form of British government bond (gilt), dating originally from the 18th century. ... Treasury Securities are bonds issued by the U.S. Federal Reserve. ...

Miscellaneous

The Ricardian equivalence hypothesis, named after the English political economist and Member of Parliament David Ricardo, states that because households anticipate that current public deficit will be paid through future taxes, those households will accumulate savings now to offset those future taxes. If households acted in this way, a government would not be able to use fiscal policy to stimulate the economy. The Ricardian equivalence result requires strong modelling assumptions. For example, the result requires that households act as if they were infinite-lived dynasties. Empirical evidence on Ricardian equivalence effects has been mixed. Ricardian equivalence, or the Barro-Ricardo equivalence proposition, is a controversial economic theory which suggests that government budget deficits do not affect the total level of demand in an economy. ...

See also

• Public finance
• Fiscal policy
• Deficit spending
• Government spending
• Government debt
• Government budget
• Tax
• Fiscal policy in the United States
• National debt by U.S. presidential terms
• Starve-the-beast philosophy
• U.S. public debt

This article does not cite any references or sources. ... Fiscal policy is the economic term that defines the set of principles and decisions of a government in setting the level of public expenditure and how that expenditure is funded. ... This article or section does not cite its references or sources. ... Government spending or government expenditure consists of government purchases, which can be financed by seigniorage (the creation of money for government funding, at a heavy price of high inflation and other possibly devastating consequences), taxes, or government borrowing. ... Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        Government debt (also known as public debt or national debt) is... A government budget is a legal document that is often passed by the legislature, and approved by the chief executive. ... “Taxes” redirects here. ... Historically, the United States government has tended to spend more than it takes in, with national debt that was close to $1 billion at the beginning of the 20th century. ... This table lists the change in the United States public debt divided by Gross Domestic Product listed by Presidential term. ... Starve-the-beast is a strategy of encouraging public budget deficits in order to force the government to reduce its spending. ... The U.S. public debt, commonly called the national debt or the gross federal debt, is the amount of money owed by the United States federal government. ...

References

1. ^ Michael Burda and Charles Wyplosz (1995), European Macroeconomics, 2nd ed., Ch. 3.5.1, p. 56. Oxford University Press, ISBN 0198774680.
2. ^ http://www.aarp.org/research/blueprint/overstatedproblem/the_fiscal_gap.html AARP article on the fiscal gap
3. ^ ^{a b} In this column, a negative number represents a deficit, and a positive number represents a surplus.

Current logo for AARP, in use since January 2007 For the AppleTalk protocol developed by Apple Computer, see AppleTalk address resolution protocol (AARP). ...

External links

Look up Deficit in
Wiktionary, the free dictionary.

• U.S. Congressional Budget Office
• Hong Kong Government Budget
• The Budget Graph: A graphical representation of the 2008 United States federal discretionary budget, including the public debt.
• United States - Deficit versus Savings rate from 1981 Historical graphical representation of the 12 month rolling Fiscal deficit versus the Savings rate of the United States. (since 1981)