In public choice theory, fiscal illusion is a failure to accurately perceive the amount of government expenditure.
The theory of fiscal illusion was first developed by the Italian economist Amilcare Puviani in his 1903 book Teoria della illusione finanziaria (Theory of Financial Illusion (not yet translated into English, but translated into German in 1960 under the title Die Illusionen in der öffentlichen Finanzwirtschaft, Berlin: Duncker & Humblot, 1960)).
Fiscal illusion theory suggests they support this policy because its cost is masked by its roundabout nature (through an increase in their rent payments).
In their book Democracy in Deficit (1977), James M. Buchanan and Richard E. Wagner suggest that the complicated nature of the U.S. tax system causes fiscal illusion and results in greater public expenditure than would be the case in an idealized system in which everyone is aware in detail of what their share of the costs of government is.
CATO Institute economist William Niskanen (2004), for instance, has noted that the "starve the beast" strategy popular among US conservatives wherein tax cuts now force a future reduction in federal government spending is empirically false.