What are the functions of public finance

Germany in data

Nobody goes swimming in this Duisburg swimming pool any longer: many municipalities are financially so bad that they close public facilities. (& copy picture-alliance)

Mark Spoerer

The increase in the importance of the state since the second half of the 19th century is reflected in public finances. While military tasks took a back seat, social and training costs increased. Accordingly, the total tax burden on private households rose from around 5 percent in the mid-19th century to just over 20 percent since the 1930s. Since then, social security contributions in particular have risen rapidly.

The concept of public finances encompasses all economic activities of the regional authorities (Reich / Bund, Länder and municipalities as well as municipal associations) and public companies that generate income and expenditure. In a democratic state, the citizens delegate tasks to the state, for the fulfillment of which (1) public expenditures are incurred, which are to be covered by (2) public revenues, in particular taxes. If this is not the case, then (3) public debt must be taken on.

In the Middle Ages and the early modern period, the sovereigns and their administrators gave little thought to the accounting separation of the (private) sovereign and public finances. In contrast, especially in self-governing cities, especially imperial cities, there was already a properly managed, albeit mostly non-public, budget.