This paper analyzes the distortions created by taxation and the features of tax systems that minimize such distortions (subject to achieving other government objectives). It starts with a review of the theory and practice of deadweight loss measurement, followed by characterizations of optimal...

This paper analyzes the optimal treatment of tax expenditures. It develops an optimal tax model where individuals derive utility from spending on a contribution' good such as charitable giving. The contribution good has also a public good effect on all individuals in the economy. The government...

The strength of the behavioral response to a tax rate change depends on the environment individuals operate in, and may be manipulated by instruments controlled by the government. We first derive a measure of the social benefit to affecting this elasticity. The paper then examines this effect in...

This paper derives optimal income tax formulas using compensated and uncompensated elasticities of earnings with respect to tax rates. A simple formula for the high income optimal tax rate is obtained as a function of these elasticities and the thickness of the top tail of the income...

The effects of income and consumption taxation are examined in the context of models in which the growth process is driven by the accumulation of human and physical capital. The different channels through which these taxes affect economic growth are discussed, and it is shown that in general the...

The complexity of the income tax is an unending source of complaint. Compliance costs have received increasing attention and are estimated to be large. Yet most recognize that some degree of complexity is necessary if ability to pay is to be measured accurately. This article presents a framework...

We investigate the optimal rate structure of an income tax system that is constrained to have only two brackets, plus a demogrant. We find that, in a two-class economy, Pareto efficient tax schedules feature at least one marginal tax rate equal to zero, and that the marginal tax rate may be...

The optimal income tax problem, since it requires self-selection constraints which define nonconvex feasible sets, is one of the many problems in economics for which randomization in the solution may be desirable. For a two-class economy. we characterize the optimal random tax schedules and we...

The optimal income taxation problem has been extensively studied in one-period models. This paper analyzes optimal income taxation when consumers work for many periods. We also analyze what information, if any, that the government learns about abilities in one period can be used in later periods...