Fiscal illusion

Fiscal illusion is a public choice theory of government expenditure first developed by the Italian economist Amilcare Puviani in his 1903 book Teoria della illusione finanziaria (Theory of Financial Illusion (not yet translated into English, but translated into German in 1960 under the title Die Illusionen in der öffentlichen Finanzwirtschaft, Berlin: Dunker & Humblot, 1960)). Fiscal illusion suggests that when government revenues are not completely transparent or are not fully perceived by taxpayers, then the cost of government is seen to be less expensive than it actually is. Since some or all taxpayers benefit from government expenditures from these unobserved or hidden revenues, the public's appetite for government expenditures increases, thus providing politicians incentive to expand the size of government.