An Overview of Government Revenues: Sources, Measures, and Alternatives

A budget is not simply a collection of government 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 need 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 how they are carried out on a regular basis, it is important to have a good knowledge of the totality of the revenue sources from which a 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 a given base. Accordingly, the chapter begins with a general discussion of the principal sources from which a government collects its revenues, especially tax revenue. Earlier, we introduced a brief history of taxation, followed by a general discussion of the desirable characteristics of a tax system and related measures. This chapter provides a detailed discussion of tax revenues, their underlying structures, characteristics, and concerns, as well as alternatives to current taxes, especially those related to income and sales, which have become important in recent years. The chapter also looks at other sources of revenue, besides taxes, that play an important role in the overall revenue structure of a government.