ABSTRACT
Tax earmarking is a far more common practice than the sparcity of literature about it would seem to suggest. Although the extent of earmarking varies from government to government, earmarked revenues probably typically account for between one-third and two-thirds of governmental expenditures in the United States. For instance, in a study cited by McMahon and Sprenkle (1970), 41 per cent of state tax revenues were found to be earmarked. In cases where it is considered politically inappropriate or economically impractical to charge directly for governmentally provided services, tax earmarking is commonly argued to be a useful way to impose such a charge indirectly. By imposing a tax on a product that is complementary in consumption with the governmentally provided service, and earmarking the revenue to financing the supply of that service, a type of quasi-pricing of the governmental service results.
