What Is Fiscal Welfare?

by James Green; Updated September 26, 2017

Fiscal welfare is the distribution -- or more specifically the redistribution -- of finances throughout an economy by means of taxes, subsidies and benefits. Although the term welfare may encompass other concepts such as social welfare and occupations welfare, people tend to primarily identify the term with fiscal welfare.

Principles

Welfare is used to address the problems of social inequality in an economy, and such inequalities may arise from both income and wealth differences. Depending on the economy, inequality may take on different forms such as stratification, where group of people are sociologically ranked; social division, where societies are institutionally and thus functionally split into two or more groups; or hierarchical inequality, which is a generally large spread in income and wealth. Hierarchical inequality is one of the more common forms of inequality in most economies.

Fiscal Welfare

Fiscal welfare involves the redistribution of wealth in order to achieve a decreased level of inequality. This may involve increasing the taxes of the rich specifically for the purpose of spending the extra funds on resources for the poor. The poor may receive such funds through means of education subsidies, welfare benefits and housing incentives. There are two types of redistribution in the fiscal welfare context. The first, vertical redistribution, involves the transfer of wealth from the rich to the poor. The second, called horizontal redistribution, involves the transfer of wealth from a group of higher wealth to a group of lower wealth.

Ideological Viewpoints

The main ideological argument for increased fiscal welfare comes primarily from the left side of the political spectrum. Political parties that advocate welfare tend to have an ideology that promotes the idea that the public provision of a society's needs is a constitutional right. Those that vote for such political parties tend to view society from a collectivist, rather than an individualist, standpoint. Political ideologies that advocate the welfare state include Marxism, socialism and some components of liberalism. Opposing ideologies include conservatism and liberal individualism. Such ideologies represent the extreme sides of the political spectrum, and most major political parties employ a mixture of these views.

Fiscal Welfare in the United States

In the United States, welfare is available for those who demonstrate a certain level of income, family size, personal circumstances such as pregnancy, unemployment or homelessness, and times of crisis such as experiencing an environmental disaster. Fiscal welfare tends to be controlled on the state level, and thus the nature of such benefits may vary by state. These programs may include Medicare and Medicaid, income tax credits, food stamps and school lunches. Fiscal welfare programs employed by the federal government include the temporary assistance for needy families (TANF) program and the supplemental security income (SSI) program.