Earmarking government revenues : does it work ?

Earmarking is the practice of assigning revenues from specific taxes or groups of taxes to specific government activities or to broader areas of government activity. As such, it contrasts with general fund financing where monies are pooled to be used for various government purposes. In practice, earmarking has come into being via statute or via constitutional clauses mandating that certain revenues only be used for specified activities. Governments often circumvent the intentions of earmarking by withholding funds or failing to change prices or taxes or, if need be, simply suspending the earmarking arrangements. One section of this report reviews the Bank's attitude toward earmarking and then summarizes its experience with a number of road funds in developing countries.Environmental Economics&Policies,Public Sector Economics&Finance,Economic Theory&Research,National Governance,Banks&Banking Reform

Paying for public spending: is there a role for earmarked taxes?

Tax earmarking, or hypothecation, refers to the assigning of receipts either from a single tax base, or as a proportion from a wider pool of revenue, to a specific end use; it contrasts with general fund financing of expenditure from consolidated receipts. The idea has been seized on both by those who want to defend the public sector who think it would make taxation popular and by those who want to cut public spending who expect the opposite effect. Earmarking may be applied in a strong or substantive sense, or in a weak or nominal sense. In the strong case, revenue determines expenditure, or at least revenue must match expenditure, and there may be associated referendums on the amount of spending and the tax rate. In the weak case, earmarking is purely formal — undertaken to make the system more transparent and to inform the taxpayer of the cost of a service. Earmarking may also be wide, covering a whole spending programme, or narrow, for a specific project within a programme. The principal example of earmarking (nominal) in the UK today is National Insurance contributions (NICs) which go to the National Insurance Fund out of which contributory benefits are paid. This paper considers the range of support for earmarked taxes, examines the issues, and asks if there is a role for such taxes in the British system.

Pigouvian tax aversion and inequity aversion in the lab

We use an experimental market with externalities to test whether inequality aversion could help explain the popularity of earmarking tax revenues. We find that voter opposition is not fully explained by material self-interest: Results indicate that preferences for fairness influence voting behavior, with greater inequality in tax revenue distribution negatively affecting the acceptability of the tax. In addition to this, we also discover a significant degree of tax-aversion in the votes. Our findings provide greater understanding of the behavioral underpinnings of the positive impact that earmarking has on the acceptability of Pigouvian taxes.Pigouvian taxes, public acceptability, earmarking, fairness, inequity aversion, laboratory experiments

Time inconsistency in environmental policy: Tax earmaking as a commitment solution

Tax earmarking imposes a constraint on government policymaking, and may be desirable if it solves a time-inconsistency problem in tax policy. In a two-period economy, in which the policy decisions regarding taxes, public goods provision, and pollution abatement are taken by a majority-elected individual, we show how the time-inconsistency problem in environmental policy arises. We demonstrate that the commitment equilibrium under no earmarking rules cannot be as fully implemented as a no-commitment equilibrium under earmarking rules. However, the earmarking rules do act as a partial commitment mechanism

The name game for contributions: Influence of labeling and earmarking on the perceived tax burden

In this paper we apply conjoint analysis as an empirical method to study the influence of tax labeling and tax earmarking on the perceived tax burden. As reference for the individual behavior we use the model of a rational utility maximizer described by the economic theory. We determine a significant influence of the labeling and the earmarking of taxes. We can show that the labeling and earmarking effect can decrease the perceived tax burden for the test persons which results in a deviation from a (rational) consumption maximizing behavior. These results give important implications for tax policy regarding further reforms of the tax and contribution system. --Tax Labeling,Tax Earmarking,Perceived Tax Burden,Behavioral Taxation,Non Rational Behavior,Conjoint Analysis,Education Allowance,Contribution System,Health Insurance

The influence of tax labeling and tax earmarking on the willingness to contribute: A conjoint analysis

We apply conjoint analysis to study the influence of tax labeling and tax earmarking on German taxpayers' willingness to contribute. From a survey based sample we show that labeling and earmarking effects can substantially increase participants' willingness to contribute, which results in a considerable deviation from a pure consumption maximizing behavior. Furthermore, we give an explanation for this effect regarding socio-demographic attributes of German taxpayers. These results explain the variety in tax labels and provide implications for tax policy regarding further reforms of the tax and contribution system: Labeling and earmarking of contributions are important instruments in selling policies and increasing tax revenue. --Behavioral Taxation,Tax Labeling,Tax Earmarking,Willingness to Contribute,Conjoint Analysis,Perceived Tax Burden

Earmarking government revenues in Colombia

This paper has two broad objectives. The first is the examination of the trends in the size and structure of earmarking since 1970, illuminating the major changes and their causes. The second is an evaluation of the major examples of earmarking with a view toward making recommendations for change. In making recommendations for reducing the scope of earmarking in Colombia, several principles should be used for guidance: (a) is there a substantial overlap between the beneficiaries and the tax/price payers for any given government service; (b) do the tax/price arrangements appear to be leading to appropriate levels of the service over time; and (c) are resources being utilized effectively for the purpose intended. The remainder of the paper is divided into four parts: (a) time series data on the size and structure of earmarking during the last two decades; (b) factors behind the popularity of earmarking in Colombia and a review of the findings and recommendations of two major government commissions which have examined the subject; (c) a critical review of the major examples which make up over 90% of total earmarking; and (d) a summary of major findings and recommendations for changes.Economic Theory&Research,Public Sector Economics&Finance,Environmental Economics&Policies,National Governance,Banks&Banking Reform

Tax earmarking and grass-roots accountability

We ask whether tax earmarking can foster accountability in public provision of goods and services when consumers can privately monitor provision. We show that earmarking can raise the stakes that consumers have in monitoring public provision independently of how taxes are earmarked, because it introduces a more direct linkage between monitoring and taxes paid

The Distribution of Revenues From State-Collected Consumer Taxes

Värdegrundsarbetet i förskolan där genus och likabehandling står i fokus är ett ämne som skall arbetas aktivt med och det var detta som var grunden i underökning. Undersökningen utgick ifrån två frågor som handlade om pedagogernas kompetens i genusvetenskap samt vilka genuspedagogiska strategier som de använde i arbetet med barnen. För att undersöka detta så valde jag att använda mig av en halvstrukturerad enkät där de flesta frågorna var av öppen karaktär för att kunna fånga vad pedagogernas kunskap om de olika genusvetenskapliga begreppen. De slutna frågorna fångade vilka genuspedagogiska strategier som pedagogerna använde i sitt arbete med barnen. 40 enkäter delades ut till pedagogerna i ett rektorsområde. Från resultatdelen kunde det utläsas att det var många olika definitioner på de genusvetenskapliga begreppen och att flertalet av pedagogerna inte hade samma syn som forskningen kring om det beror på det sociala eller det biologiska när barnen positionerar sig som pojkar eller flickor. Resultatet visade också att endast ett fåtal pedagogerna använder sig av det komplicerande och normkritiska arbetssättet med barnen och att lite fler än hälften tycker att de har tillräckligt med kunskap för att arbeta med genus. Slutsatser som kunde dras från resultaten från enkäten är att pedagogernas kompetenser i de genusvetenskapliga begreppen är på olika nivå och att de varierar väldigt mycket. Därför drog jag den slutsatsen att det är därför som det komplicerande och normkritiska arbetet inte används i arbetet med genus i förskolan. Ändå så ansåg flertalet av de pedagoger som inte arbetade med det komplicerande och normkritiska arbetet att de ändå hade tillräckligt med kunskap i genus. Kompetens i ett ämne gör att det är möjligt att ta ut svängarna, att verkligen se hur barnen gör genus i barngruppen och att ifrågasätta normer i samhället tillsammans med barnen

influence of labeling and earmarking on the perceived tax burden

In this paper we apply conjoint analysis as an empirical method to study the influence of tax labeling and tax earmarking on the perceived tax burden. As reference for the individual behavior we use the model of a rational utility maximizer described by the economic theory. We determine a significant influence of the labeling and the earmarking of taxes. We can show that the labeling and earmarking effect can decrease the perceived tax burden for the test persons which results in a deviation from a (rational) consumption maximizing behavior. These results give important implications for tax policy regarding further reforms of the tax and contribution system