What Does Public Finance Mean to You?

A field of economics that is mainly used to pay for government related activities is mainly referred to as public finance. Public finance also constitutes the administration of these activities. The income gotten from public finance is mainly through the use of three different sources. These sources are taxes, debts and seignior age. These three sources of income will make sure that the government has a sufficient source of income. 

 

The first type of income generation is through taxes. Taxes are the highest contributor to the income generated by the government. It is not only significant due to the importance of all the revenue that has been collected, but also due to the problems that are experienced due to high tax levied. The main reason taxes are levied is to create revenue for a government. This is also the reason why in most countries the levels of tax are quite high. The level of tax is high in order for a government to fulfill its obligations. Though it is high, taxation is also used to make sure that there is some level of equality through re-distribution of wealth. Apart from this, taxation is used to control inflation. If taxation was low, the money that should have gone into tax would have been sent to consumption and would lead to inflation. Taxes are levied through different platforms and they vary from one country to another. 

 

Debt is another source of government revenue. This sounds to be quite farfetched but it is true. Government debt is also known as national or public debt. This is mainly any amount of money that is owed by one or any of the government levels. In some governments, there is the issuance of revenue bonds which are mainly based on the government’s taxing authority. Since the government represents the people of a country, a government debt will be seen as a public debt. This means that the government debt can either be internal or external. Internal debt is owed to lenders of the said country while external debt is owed to lenders who are foreign. 

 

Seignior age is the final main source of government income. This is a term that is used to define the revenue that is gotten by the government from issuing currency. Seignior age comes about as a difference between the face value of the money and the costs of producing, distributing and removing the note or coin from circulation. This type of revenue is mostly significant in countries that do not have an advanced industrial platform.