Ways of financing welfare states

Bent Greve

Chapter 2 in Concise Introduction to Financing Welfare States, 2026, pp 11-50 from Edward Elgar Publishing

Abstract: This chapter presents different ways of using taxes and duties as part of the financing of welfare states, and the size and variation across countries. This includes the macroeconomic as well as other types of impact of using a variety of approaches to finance welfare states income transfers and services. The chapter covers the typical use of different kinds of income taxation (on persons and companies), Value Added Tax (VAT) and a large variety of other types of duties with different purposes, including the use of sin-taxes. The taxation of houses, land, wealth and inheritance as well as on capital income is also discussed. The focus is not only on the ability to generate revenue, but also how it can influence the allocation and distribution of resources (including the impact on the degree of inequality), as well as how they vary with regard to macroeconomic issues such as the balance of payments, economic growth and employment/unemployment. How the tax base is defined, including the use of tax expenditures, can also influence the ability to finance welfare states’ expenditures, as well as having a number of economic impacts on societies’ development. Multiplier effects of different ways are included as this might be an indicator of how effective different instruments might be. What a good tax structure looks like is incorporated into the chapter.

Keywords: Tax structure; Allocation; Distribution; Impact of taxes and duties (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035359875
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