C. ECONOMIC ASPECTS OF TAXATION

Governments must pay for their programs. funds come mainly from taxes, and any shortfall is a deficit that is borrowed from the public. But in economics flit always to pierce l/at veil of monetary flows to understand  resources. Behind the dollar flows of taxes, what the government really needs is the economy’s scarce land, labor, and capital. When the nation fights a war in the Balkans, Congress argues about how to finance the war; but what really happens is that people are diverted from their civilian jobs, airplanes trans- .port troops rather than tourists, and oil goes to airplanes rather than cars. When the government gives out a grant for biotechnology research, its decision really means that a piece of land that might have been used for an office building is now being used for a laboratory.

In taxing, government IS in reality deciding how to draw the required resources from the nation ‘s households and businesses for public purposes. The money raised through taxation is the vehicle by which real resources are transferred from private goods to collective goods.

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