Equalization grant

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Updated: Aug 20, 2021

An unconditional payment from one leve! of government to a subordinate leve! based upon a formula ensuring that, in order to raise a specific per capita leve! of public revenue, the sub-ordinate government does not have to levy unduly harsh rates of taxation. This specific level of per capita revenue might be the average for all subordinate governments or the average of the two wealthiest subordinate levels of government. The basic objective is to equalize taxable capacities of jurisdictions with different per capita income and wealth conditions. The U.K. government’s rate support grant, through which central government supplements the revenues of the local authorities, has some features of an equalization grant.

Reference: The Penguin Dictionary of Economics, 3rd edt.



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