Social Equity Practices in Public Financial Management: A Conceptual Review and Proposed Reforms

ABSTRACT Equity has been at the core of public finance going at least as far back as 1776 when Adam Smith included it as one of four canons of a good tax in his classic An Inquiry into the Nature and Causes of the Wealth of Nations (Tax Project Institute 2025). Smith postulated that equity should be based on a taxpayer's ability to pay, establishing the foundation that defined equity by comparing taxes to income and wealth. This orientation of the equity dialogue in public finance has persisted since then, but in recent years dimensions of equity other than those based on income and wealth have been added to the dialogue. Referred to as “social equity budgeting,” the expanded dialogue considers the impact of government's revenue and expenditure decisions on populations defined not only by income and wealth but also by other demographic characteristics such as race and gender. The literature on social equity budgeting is growing worldwide. But there has been no concomitant evolution in the consideration of social equity in the literature on public financial management (PFM), the overall system by which financial resources are planned, directed and controlled. In an effort to narrow this gap, we conducted a conceptual review paired with a reform agenda to suggest ways in which PFM research and practice can make further progress in addressing social equity issues with a focus on three dimensions of equity: access, procedural fairness, and outcomes. We believe that our suggestions can help guide future inquiry that can be important to advance social equity for both theory and practice in public administration, particularly the teaching of PFM.