Fiscal policy

Presumptive Taxation for Small Businesses How presumptive taxation estimates business income from observable proxies like turnover and assets rather than full accounting records.

Primary Balance The primary balance is the difference between government spending and revenue, excluding interest payments on debt. It reveals how much of the deficit is structural versus driven by debt servicing costs.

Primary Dealer System A mechanism by which governments designate specific banks as obligatory bidders at sovereign-debt auctions, ensuring orderly issuance and price discovery.

Primary Deficit vs Primary Surplus Understand primary deficit vs primary surplus and why economists focus on the primary balance separately from the overall deficit when assessing fiscal health.

Primary Surplus Required for Debt Stabilisation Primary surplus required to stabilise debt: the arithmetic linking growth, interest rates, and fiscal balance to stop debt-to-GDP ratio from rising.

Primary Surplus vs Overall Budget Surplus How primary surplus excludes interest costs to reveal whether a government is truly tightening fiscal policy.

Programme Budgeting Organising government expenditure by policy objectives or programmes rather than by administrative agency or line-item.

Progressive Tax A tax system where the effective rate (tax owed as a percentage of income) rises as income increases, achieved through marginal-rate brackets that tax incremental income at higher rates.

Property Tax A local government revenue source based on assessed valuations of real property and personal property, with rates set by municipalities.

Public Debt Public debt is government debt held by the general public — individuals, corporations, and foreign entities — as opposed to debt held internally by government agencies. It is the portion of government debt that represents true external obligations.

Public-Private Partnership Debt Debt incurred through public-private partnerships that blurs the line between government and private borrowing.

Qualified Opportunity Zone Tax Deferral Qualified opportunity zone tax deferral: how investing capital gains defers and reduces tax liability with holding-period requirements.

Refundable vs Non-Refundable Child Tax Credit Child tax credit refundability determines how much poor families receive. Partial refundability means lowest earners get less per child than middle-class families.

Regaining Market Access After Sovereign Default How defaulted sovereigns rebuild reserves, restore primary surplus, complete debt restructuring, and regain access to international bond markets.

Regressive Tax A tax burden that consumes a larger share of income for lower-earning individuals than higher-earning ones.

Revenue-Neutral Tax Reform What revenue-neutral tax reform means, how it's scored by budget analysts, and the trade-offs of shifting taxes between groups while keeping total intake fixed.

Ricardian Equivalence Ricardian equivalence is the proposition that government financing through deficits or taxation has equivalent effects on the economy because rational consumers recognize that deficits create future tax obligations.

Rollover Risk (Sovereign) The danger that a government cannot refinance maturing bonds when credit markets seize or rates spike sharply.

Sales Tax Consumption tax levied at the point of sale, creating cascading effects across supply chains.

Saving Leakage How household and corporate saving reduce the fiscal multiplier by withdrawing purchasing power from successive spending rounds.

Selective Default: What It Means When a Rating Agency Uses the Term Selective default credit rating means a sovereign has defaulted on some obligations but not others. Agencies like S&P and Moody's use this rating to signal partial payment failure.

Sequestration Sequestration is an automatic reduction in government spending that is triggered when certain fiscal targets are not met. It was established in the 2011 Budget Control Act as a mechanism to force budget discipline.

Shadow Budget: Off-Budget Spending and Hidden Fiscal Costs Shadow budgets comprise off-budget spending via guarantees, state enterprises, and quasi-fiscal activities that lie outside formal budget accounts.

Sin Taxes: Design, Revenue, and Behavioural Effects Sin taxes—excise duties on tobacco, alcohol, and sugar—are designed to raise revenue while discouraging consumption, but effectiveness depends on elasticity, enforcement, and substitution.

Sinking Fund (Government) A dedicated reserve account that a government accumulates to retire a specific tranche of public debt at maturity.

Social Insurance Contributory government benefits funded by payroll taxes, distinct from welfare and built on earned entitlement principles.

Sovereign Asset Seizure by Creditors Sovereign asset seizure: how creditors attach central bank reserves, embassies, and state-owned aircraft after default, circumventing sovereign immunity doctrine.

Sovereign CDS Settlement: How Credit Default Swaps Pay Out After a Default Sovereign CDS settlement follows ISDA rules: a credit event is declared, the ISDA Determinations Committee meets, and a cash auction determines the recovery payout. This process determines payouts for billions in protection.

Sovereign CDS Spread: What It Measures How sovereign CDS spreads reflect market probability of government default, pricing in credit risk and macroeconomic stress.

Sovereign Debt Sovereign debt is debt issued by a government. It includes Treasury bonds, bills, notes, and other obligations issued by the state to finance spending or refinance existing debt.

Sovereign Debt Contagion The process by which a sovereign default in one country spreads financial stress and increased borrowing costs to unrelated economies through investor panic and correlated risk repricing.

Sovereign Debt Moratorium A sovereign debt moratorium is a formal government suspension of debt payments, distinct from default, allowing countries to restructure liabilities.

Sovereign Debt Overhang How excessive public debt suppresses private investment and economic growth by capturing future fiscal returns.

Sovereign Debt Seniority and Creditor Hierarchy How different classes of sovereign debt creditors are ranked in practice during restructuring, and why formal legal seniority differs from observed payment priority.

Sovereign Debt Seniority: Which Creditors Get Paid First in a Default Sovereign debt seniority is an informal but powerful hierarchy of creditor priority when a government cannot pay all its obligations. Multilateral lenders rank highest, then bilateral creditors, then private bondholders.

Sovereign Default A sovereign default occurs when a government fails to pay its debts — either by refusing to pay creditors or by inability to pay. It is the most severe fiscal crisis a government can face.

Sovereign Default and Pension Funds: What Happens to Retirement Savings How a sovereign default effect on pension funds ripples through retiree assets via bond losses, currency collapse, and banking-sector stress.

Sovereign Default Warning Signs: Indicators That Precede a Crisis Sovereign default warning signs include rising credit spreads, foreign reserve depletion, debt-to-GDP ratio above 90%, and currency weakness. Learn the fiscal and market indicators.

Sovereign Default: Consequences for the Borrowing Country What happens after a country defaults on debt: market access loss, currency crisis, restructuring, and paths to recovery.

Sovereign Wealth Fund vs Government Debt: Net Position Why countries hold both sovereign wealth funds and public debt, and how analysts calculate the government's true net asset or liability position.

Sovereign Wealth Fund: How It Works How governments accumulate surplus revenues into sovereign wealth funds, how they are governed, and what fiscal objectives they serve.

Spending Multiplier vs Tax Multiplier Why government spending has a larger impact on aggregate demand per dollar than tax cuts of the same size, a fundamental distinction in fiscal policy design.

Spending Review A periodic government-wide reallocation of departmental budgets, typically setting expenditure limits for three to five years ahead.

Spending Review vs Budget Review: Key Differences Understand the distinction between spending reviews and budget reviews: periodic baseline resets versus annual budget cycles in government finance.

SSI vs SSDI: Key Differences for Applicants Differences between Supplemental Security Income and Social Security Disability Insurance: eligibility, benefits, asset limits, and how to apply.

Standstill Agreements in Sovereign Debt How standstill agreements in sovereign debt crises freeze payments and litigation while a government negotiates with creditors, and the difference from unilateral moratoria.

State-Dependent Multiplier The fiscal multiplier is larger in recessions and smaller in booms, varying with economic slack, inflation, and monetary policy space.

Stigma and Low Take-Up in Transfer Programs Stigma and low take-up in transfer programs: why eligible households forgo entitled benefits, and what outreach, administrative simplification, and policy design changes raise participation.

Stimulus Package A stimulus package is temporary legislation that increases government spending or cuts taxes in response to a recession or economic crisis, designed to boost aggregate demand and prevent economic collapse.

Structural Balance The structural balance is a government budget adjusted to remove the temporary effects of the business cycle, revealing the underlying fiscal stance independent of economic conditions.

Structural vs Cyclical Budget Deficit A structural budget deficit persists even at full employment; a cyclical deficit arises from the business cycle. Understanding the split shapes fiscal policy debate.

Sudden Stop The abrupt reversal of international capital inflows that forces emerging economies into liquidity crises and painful adjustment.

Sunset Provisions in Tax Legislation Why tax laws include automatic expiration dates, how sunset provisions affect revenue scoring, and what happens when they near.

Supermultiplier The long-run fiscal multiplier that emerges when investment responds endogenously to sustained demand growth.

Supplemental Appropriation Emergency or mid-year spending legislation passed outside the regular annual appropriations cycle to address unforeseen needs.

Take-Up Rate in Government Transfer Programs The share of eligible households actually enrolled in a transfer program; defines gaps between eligibility and participation.

Tax Avoidance vs. Tax Evasion The legal and moral boundary between minimising taxes within the law and illegally concealing income from tax authorities.

Tax Base Erosion Structural forces that shrink the taxable pool of income or transactions, reducing government revenue independent of tax rate changes.

Tax Expenditure Revenue forgone through deductions, credits, and exclusions, treated as implicit spending funded by lower tax rates on others.

Tax Expenditure: Hidden Costs in the Budget Tax expenditures are foregone revenues from deductions, credits, and exclusions—off-budget spending that avoids scrutiny.