Hypothecation (taxation)
The hypothecation of a tax (also known as the ring fencing or ear marking of a tax) is the dedication of the revenue from a specific tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...

 for a particular expenditure purpose. Hypothecation
Hypothecation is the practice where a borrower pledges collateral to secure a debt. The borrower retains ownership of the collateral, but it is "hypothetically" controlled by the creditor in that he has the right to seize possession if the borrower defaults...

 is the pledging of assets.

Hypothecated taxes are often subject to unexpected shortfalls and surpluses. This may create political pressure to adjust the tax, to budget non-dedicated revenues for the purpose in question, or to reallocate surplus funds to other purposes. Examples of hypothecated taxation include the gasoline tax in the US
Fuel taxes in the United States
The United States federal excise tax on gasoline, as of February 2011, is 18.4¢/gal and 24.4¢/gal for diesel fuel. In January 2011, motor gasoline taxes averaged 48.1¢/gal and diesel fuel taxes averaged 53.1¢/gal, which accounted for 14% of the price of gasoline and 15% of the price of diesel.As...

, a tax on gasoline
Gasoline , or petrol , is a toxic, translucent, petroleum-derived liquid that is primarily used as a fuel in internal combustion engines. It consists mostly of organic compounds obtained by the fractional distillation of petroleum, enhanced with a variety of additives. Some gasolines also contain...

 dedicated to the funding of transport infrastructure.

A common example in many European countries is a television licence
Television licence
A television licence is an official licence required in many countries for the reception of television broadcasts...

. Here, all owners of television set
Television set
A television set is a device that combines a tuner, display, and speakers for the purpose of viewing television. Television sets became a popular consumer product after the Second World War, using vacuum tubes and cathode ray tube displays...

s are obliged to pay the government an annual fee to use their televisions. The proceeds of the levy are then used to fund public broadcasting
Public broadcasting
Public broadcasting includes radio, television and other electronic media outlets whose primary mission is public service. Public broadcasters receive funding from diverse sources including license fees, individual contributions, public financing and commercial financing.Public broadcasting may be...

. Another example is a dedicated tax on the private trading of securities
Security (finance)
A security is generally a fungible, negotiable financial instrument representing financial value. Securities are broadly categorized into:* debt securities ,* equity securities, e.g., common stocks; and,...

 (for example, 0.3 cents per dollar traded) used to fund public works
Public works
Public works are a broad category of projects, financed and constructed by the government, for recreational, employment, and health and safety uses in the greater community...

programmes directly or to pay the finance costs of such programs.
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