Transfer payment

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In political science and economics, a transfer payment is a payment of money from a government to an individual for which no good or service is required in return. In economics, government transfer payments can be considered a negative tax, since in the case of a tax, the government charges individuals without getting any good or service in direct exchange.

Transfer payments are separated into two categories based on their reliance on the recipient’s income level. Payments that are dependent on the income of the recipient are means-tested transfers and include examples such as welfare, Medicaid, Supplemental Security Income (SSI), food stamps, head start, housing assistance, and public support for students, including scholarships and financial aid and death benefits for parents. Social insurance transfers are transfer payments that are not dependent on the income of the recipient, and include social security payments, Medicare, publicly-funded pensions and unemployment insurance.

[edit] Alternative use for administrative transfer

In some federal systems the term is also used to refer to payments from one order of government to another; for example in Canada, transfer payments usually refer to a system of payments from the federal government to the provinces. Major Canadian transfer payments include equalization payments, the Canada Health Transfer and the Canada Social Transfer (formerly the Canada Health and Social Transfer) and Territorial Formula Financing.

They are sometimes referred to as income transfers