Equalization Payments

AAA

DEFINITION of 'Equalization Payments'

A payment to a state, province or individual from the federal government for the purpose of offsetting monetary imbalances between different parts of the country or between individuals. Equalization payments help create comparable levels of public services, such as education and healthcare, and to supplement disadvantaged individuals with disabilities or low income.

Also known as "transfer payments".

BREAKING DOWN 'Equalization Payments'

In many countries there is a vast diversity between states and provinces in terms of the availability of employment, natural resources, etc. Equalization payments help correct these imbalances by spreading wealth from richer parts of the country to poorer areas, or from richer individuals to poorer ones if a progressive personal tax system is in place.

Although there is no formalized equalization payment program in the United States, many of the poorer areas receive assistance through grants and various social programs. These programs include Medicaid and Social Security.

Equalization payments are commonly distributed in Canada, Australia and Switzerland.

RELATED TERMS
  1. Interest Equalization Tax

    A federal levy on the purchase price on foreign stocks and bonds ...
  2. Social Security

    A United States federal program of social insurance and benefits ...
  3. Economics

    A social science that studies how individuals, governments, firms ...
  4. Medicaid

    A joint federal and state program that helps low-income individuals ...
  5. Progressive Tax

    A tax that takes a larger percentage from the income of high-income ...
  6. Transfer Payment

    1. In the United States, a payment made to individuals by the ...
Related Articles
  1. Economics

    Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
  2. Retirement

    Income Relating: A New Concept In Medicare

    You can retire, but you can never retire from income tax planning.
  3. Retirement

    Introduction To Social Security

    You've probably contributed to this fund, but will you reap the benefits? Find out here.
  4. Investing Basics

    Explaining Trade Liberalization

    Trade liberalization is the process of removing or reducing obstacles that impede the exchange of goods and services between nations.
  5. Investing

    What’s Holding Back the U.S. Consumer

    Even as job growth has surged and gasoline prices have plunged, U.S. consumers are proving slow to respond and repair their overextended balance sheets.
  6. Economics

    The Problem With Today’s Headline Economic Data

    Headwinds have kept the U.S. growth more moderate than in the past–including leverage levels and an aging population—and the latest GDP revisions prove it.
  7. Economics

    Explaining the Participation Rate

    The participation rate is the percentage of civilians who are either employed or unemployed and looking for a job.
  8. Economics

    What Qualifies as Full Employment?

    Full employment is an economic term describing a situation where all available labor resources are being utilized to their highest extent.
  9. Fundamental Analysis

    Is India the Next Emerging Markets Superstar?

    With a shift towards manufacturing and services, India could be the next emerging market superstar. Here, we provide a detailed breakdown of its GDP.
  10. Economics

    A Look at Greece’s Messy Fiscal Policy

    Investigate the muddy fiscal policy, tax problems, and inability to institute austerity that created the Greek crises in 2010 and 2015.
RELATED FAQS
  1. When has the United States run its largest trade deficits?

    In macroeconomics, balance of trade is one of the leading economic metrics that determines the trading relationship of a ... Read Full Answer >>
  2. Which is more important to a nation's economy, the balance of trade or the balance ...

    There is no question the composition of a country's balance of payments is more important than its balance of trade. This ... Read Full Answer >>
  3. What are the ethical arguments against government subsidies to companies like Tesla?

    The ethical argument behind government subsidies is that they should be put into place to help industries that will, in turn, ... Read Full Answer >>
  4. How can tariffs cause inefficiencies in domestic industries?

    Any government regulation naturally creates inefficiencies in a pure supply and demand marketplace. When it comes to the ... Read Full Answer >>
  5. How do changes in interest rates affect the spending habits in the economy?

    Changes in interest rates can have different effects on consumer spending habits depending on a number of factors, including ... Read Full Answer >>
  6. How autonomous are special administrative regions?

    When most people think of special administrative regions, or SARs, they are referring to Hong Kong and its relationship with ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  2. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  3. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  4. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  5. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  6. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!