Which practice involves designating a specific revenue source for a specific purpose?

Earmarking involves allocating a particular revenue source for a specific purpose, ensuring that funds collected from that source can only be used for designated activities or services. This practice is common in public finance, as it allows governments to create dedicated funding streams for important programs, thus providing a level of financial discipline and predictability.

For example, funds collected from a specific tax, like a gasoline tax, might be earmarked solely for transportation infrastructure improvements. This guarantees that the revenue generated is utilized for enhancing and maintaining roads and transit systems, aligning financial resources with policy goals.

In contrast, fee structuring refers to the way fees are set and charged for public services, which doesn’t inherently involve designating the revenue for a specific purpose. Revenue distribution deals with how revenue is shared or allocated among different entities or purposes, while tax allocation refers to the way tax revenues are divided among various public services or projects but does not specifically emphasize a direct link to dedicated revenue sources.