It's state collection through taxes
Lustig and Higgins 18, *Senior Fellow, Global Economy and Development, Brookings Institution, **Reporter Writer (*Lora Lustig, **Sean Higgins, 2018, “Commitment to Equity Handbook: Estimating the Impact of Fiscal Policy on Inequality and Poverty,” Brookings Institution, ISBN: 978-0-8157-3221-1, Chapter 1: THE CEQ ASSESSMENT Measuring the Impact of Fiscal Policy on Inequality and Poverty, University of Kansas Libraries, Springer)
1 The Theory of Fiscal Redistribution: Key Analytical Insights
In this Handbook, “fiscal redistribution” refers to the process by which the state collects revenues from individuals and households (primarily through taxes) and spends these revenues on benefits (for example, cash transfers, price subsidies, and in-kind benefits such as education and health) intended for specific individuals and households. In so doing, the state changes the postfiscal income distribution and poverty rates that would have prevailed in the absence of fiscal policy. Because of behavioral responses and general equilibrium effects, fiscal policy can also change the prefiscal income distribution and poverty rates. While at this point the CEQ Assessments do not estimate the counterfactual prefiscal income with these second-round effects in place, it is important to note that the analytical insights presented here and in chapters 2 (Enami, Lustig, and Aranda), 3 (Enami), 4 (Higgins and Lustig), and 5 (Enami) apply to fiscally included income redistribution regardless of the method used to estimate its extent. That is, regardless of whether fiscal redistribution is calculated using run-of-the-mill fiscal incidence analysis, microsimulation methods, or partial or general equilibrium modeling, the theoretical results discussed below and in the next four chapters apply.