What is a dedicated tax?

A dedicated tax is a type of revenue source that is specifically earmarked or restricted for particular purposes or activities. This means that the funds generated from a dedicated tax can only be used for the designated program or service it was created to support. Examples often include taxes collected for funding education, transportation infrastructure, or certain health services. By designating the revenue, the government ensures that funds are allocated to critical areas of need, often reflecting the priorities of the community.

Understanding this concept is crucial because it highlights the importance of fiscal responsibility and transparency in government finance. It illustrates how governments can align tax collection with public benefit, ensuring that taxpayer dollars directly support the services that citizens expect and depend on.