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Net Taxes

Written By
Paul Tracy
Updated August 12, 2020

What are Net Taxes?

In economics, net taxes are taxes on production less subsidies received. Alternatively, net taxes are taxes paid to the government less transfer payments.

How Do Net Taxes Work?

Let's assume that the United States collects $40 trillion in taxes this year and makes $39 trillion in transfer payments (entitlements, budgeted spending, etc.).

Net taxes are $40 trillion - $39 trillion = $1 trillion.

Why Do Net Taxes Matter?

For governments, net taxes are a simple version of a checkbook balance. They measure the inflows and outflows of the government's tax activities. note that net taxes do not directly or necessarily reflect monetary policy, Treasury activities, investment returns, or foreign trade issues. 

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