Theory
In theory, governments withdraw resources from society in the form of taxation, and contribute resources back into society in the form of expenditures. However, the burdens of taxation are not borne equally by individuals, and the benefits of government expenditures are not distributed equally throughout society. As a result, the distribution of tax burdens and government expenditure benefits is an important economic question to those concerned with the equity of the fiscal system. When the economic incidence of taxation is combined with the economic incidence of government expenditures, the result is a measure of the overall increase or decrease in welfare that individuals enjoy from the state's taxing and spending policies. This is referred to as fiscal incidence.
Read more about this topic: Fiscal Incidence
Famous quotes containing the word theory:
“The theory of rights enables us to rise and overthrow obstacles, but not to found a strong and lasting accord between all the elements which compose the nation.”
—Giuseppe Mazzini (1805–1872)
“Psychotherapy—The theory that the patient will probably get well anyway, and is certainly a damned ijjit.”
—H.L. (Henry Lewis)
“The weakness of the man who, when his theory works out into a flagrant contradiction of the facts, concludes “So much the worse for the facts: let them be altered,” instead of “So much the worse for my theory.””
—George Bernard Shaw (1856–1950)