Governance‎ > ‎Fiscal policy‎ > ‎Tax‎ > ‎What does tax pay for?‎ > ‎


This page is currently a place-holder
Please check out the next section for a page with more content. Support

Why are drivers that hardly use their car not outraged that they are subsidising other drivers?

Education Subsidies
Someone has to pay for tertiary education. Lecturers have to be paid, buildings and facilities maintained. If this is paid out of taxation, it means that taxpayers in general pay for it, rather than just the beneficiaries of it. It means that the person who leaves school to become a casual labourer is paying higher taxes so that someone who is already better intellectually endowed will have access to better jobs and a higher income for life.

Regional Aid

Some people claim regional aid is necessary to bring jobs to depressed areas.
This notion assumes that the present distribution of population and industry is the optimum, and that we should resist it changing. It further assumes that government can move factories and jobs about like pieces on a chessboard. Neither assumption is valid.

Even with positive exteranalities, we do not need to subsidise activities where the benefit of those activities to the recipient are greater than the costs. The recipient already has enough incentive to engage in those activities.