A subsidy is a benefit given by the government to groups or individuals, usually
in the form of a cash payment or a tax reduction. The subsidy is typically
given to remove some type of burden, and it is often considered to be in the
overall interest of the public.
Often considered a form of financial aid, a subsidy is a
payment, provided directly or indirectly, that provides a concession to the
receiving individual or business entity. Subsidies are generally seen as
privileges, as they lessen an associated burden that was previously levied
against the receiver or promote a particular action by providing financial
support.
Reasons
for Subsidies
A
subsidy is generally used as a form of support for particular portions of a
nation’s economy. It can assist struggling markets by lowering the burdens
placed on them, or encourage new developments by providing financial support
for the endeavors. Often, these areas are not being effectively supported
through the actions of the general economy, or may be undercut by activities in
rival economies.
Examples
of Subsidies -
There are many forms of subsidies given out by the government, including
welfare payments, housing loans, student loans and farm subsidies. For example,
if a domestic industry such as farming is struggling to survive in a highly
competitive international industry with low prices, a government may give cash
subsidies to farms so that they can sell at the low market price but
still achieve financial gain.
Subsidies
in Health Care - With the enactment of the Affordable Care Act in the United
States, a number of U.S. citizens became eligible for health care subsidies
based on the income and family size of the associated household. These
subsidies are designed to lower the out-of-pocket costs for health care
premiums on households that function below certain thresholds. In these
instances, the funds associated with the subsidies are sent directly to the insurance
company to which premiums are due, lowering the payment amount required from
the household.
