, Volume 8, Issue 2, pp 151-163

The Separation of Spending from Taxation: Implications for Collective Choices

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Our fiscal process divorces payment from use. Whilethis divorce has led many analysts of government to separatediscussion of public expenditures from their funding, or usefrom payment, we argue that this approach does not provide auseful framework for understanding our public choices. We arguethat it is the divorce of payment from use that underlies ourfiscal process and, rather than simply “dismiss out of hand”the study of our fiscal process, it should be an integral partof our study of government. Our framework for describing fiscalinstitutions indicates how our fiscal process invites rent-seekingbecause it allows beneficiaries of programs to avoid paymentfor those programs. We conclude by examining how various changesin the fiscal process may influence our public choices.