An Overview of Government Revenues

Abstract

A budget is not simply a collection of revenues and expenditures; it is much more than that. It is a reflection of the general economic condition of a political jurisdiction, its revenue base, the critical needs for public goods and services, and how the government plans to meet those needs. Therefore, to understand the budgetary activities of a government, in particular the range of goods and services it provides, it is important to have a good knowledge of the totality of the revenue base from which the government collects its revenues, including the process by which it raises those revenues and spends them on public goods and services. Having a good knowledge of the revenue base and its structure is also important to understand how much flexibility a government has in raising the needed revenue from the various sources. Accordingly, the chapter begins with a general discussion of the principal sources of government revenue, in particular, tax revenue—their underlying structure, characteristics, and some common concerns. This is followed by a discussion of alternatives to current taxes, especially income tax, which has become important in recent years. The chapter also looks at various other sources of revenue, besides taxes, that play an important role in the overall revenue structure of a government, and concludes with a brief discussion on the tradeoff between tax and non-tax revenue.