What role for hypothecated taxation in financing public policies?
Is there a role for hypothecated (earmarked) taxation in the funding of public services? Those who support hypothecation suggest that earmarked taxes provide a clearer mechanism for public references to be brought to bear on the political process. Opponents suggest that tax earmarking is a deceit based on fiscal illusion, and that a move to hypothecation is merely window-dressing to disguise potentially unpopular tax rises. What is the likely economic impact of tax hypothecation? Is there any evidence to suggest that hypothecation can offer positive economic benefits, either in the form of increased revenues, or in an improvement in social wellbeing? Are there any lessons to be drawn from past experiences of tax earmarking?

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