Using the standard nonlinear income taxation framework with heterogeneity of preferences, this paper examines the optimality of workfare as a screening tool. It is assumed that workfare does not serve as a human capital investment, participation is mandatory, and administrative costs are...

We examine whether minimum wages can fulfill a useful role as part of an optimal nonlinear income tax scheme. In this setting, governments cannot observe household abilities, only their incomes. Redistributing according to income, the government is constrained by a set of incentive constraints....

This paper studies the optimal Pigouvian tax for correcting pollution when the government also uses distortionary taxes to raise revenues. When preferences are quasilinear in leisure and additive, the Pigovian tax can be separated from the Ramsey revenue-raising tax. We characterize the...

With quasi-linear in leisure preferences, closed-form solutions for the marginal tax rates and the marginal utility of consumption under utilitarian and maxi-min objectives depend only on the skill distribution. Bunching induced by binding second-order incentive conditions also depends only on...

We study the optimal redistributive tax structure when the population can be disaggregated into tagged groups. We begin with the case in which the tag has no normative significance, but simply separates the population into identifiable groups with different distributions of ability-types. Under...

Through tax evasion, through the labour-leisure choice or in other ways, taxpayers reduce the tax base in response to an increase in the tax rate. The process is commonly-believed to generate a humped Laffer curve with a revenue-maximizing tax rate well short of 100%. That need not be so. In the...

This paper examines the second-best tax policy to minimize envy in the sense of Chaudhuri (1986) and Diamantaras and Thomson (1990). An allocation is $\lambda$-equitable if no agent prefers a proportion $\lambda$ of any other agent's bundle. We study the allocations that maximize $\lambda$ among...

Important as it is for public policy, there is still no consensus about the size of the revenue-maximizing tax rate at the top of the Laffer curve. The purpose of this essay is not to supply a correct rate, but to identify difficulties in doing so. 1) Estimates of the revenue-maximizing tax rate...

Tax analysis and forecasting of revenues are of critical importance to governments in ensuring stability in tax and expenditure policies. To augment timely and effective analysis of the revenue aspects of the fiscal policy, governments have increasingly turned toward in-house tax policy units...

A common, though by no means universally-accepted doctrine among practitioners of law and economics is that redistribution is no business of the law. This efficiency-only doctrine is not that redistribution is unworthy as a social objective, but that any given benefit to the poor is attainable...