The Myth of Fiscal Externalities
Many economists refer to phenomena whereby the behavior of people affects the cost of some subsidy or alters the revenues from some tax as externalities. The author refers to these as â€œfiscal externalitiesâ€ ; an example is smoking imposing costs on taxpayers due to the existence of subsidized medical care. This article shows that fiscal externalities do not necessarily imply any inefficiency, and when there is inefficiency, it is the result of the preexisting policy (the medical care subsidy) that creates the fiscal externality. Moreover, when there is inefficiency, the nature and magnitude of the fiscal externality is not a reliable guide to the appropriate corrective policy. For example, it will usually be best to modify the preexisting policy (the medical care subsidy) rather than tax smoking.
When requesting a correction, please mention this item's handle: RePEc:sae:pubfin:v:27:y:1999:i:1:p:3-18. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (SAGE Publishing)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.