This paper presents for the .rst time the properties of optimal piece-wise linear tax systems for two-earner households, based on joint and individual incomes respectively. A key contribution is the analysis of the interaction of second earner wage di¤erences, variation in prices of bought-in...

The Mirrlees Review of the UK tax system, together with its companion volume of research papers, can be expected to influence future discussions of tax reform. Indeed, this can already be recognised in the Henry Review. As far as income taxation is concerned, the most substantive recommendation...

This paper analyses optimal corrective taxation and optimal income redistribution. Under general utility functions, the Pigouvian pollution tax is higher if pollution damages disproportionally hurt the poor due to equity weighting of pollution damages. Moreover, optimal pollution taxes should be...

We analyze optimal taxation in an economy with monopsonistic labour markets. The individuals, whose only decisions are whether to work, or not, have heterogeneous productivities and opportunity costs of work. Given its preferences for redistribution, the government, which does not observe the...

This paper analyses the national tax treatment of interestexpenditures of multinational enterprises in a non-cooperative world. It is shown that the international tax systemgenerally leads to distortions in the capitaldecisions of multinational firms. In contrast to the existingliterature on the...

We argue that promoting education may be a means to reduceincome inequality. When workers of different skill levels areimperfect substitutes in production, an increase in the level ofhuman capital in the economy reduces the return to education.Hence, a given compression of after-tax incomes can...

This paper augments the theory of optimal linear income taxation by taking into account human capital accumulation as a dimension of labor supply. The distribution of earning potentials is endogenous because agents differ in the ability to learn. Taxation affects utilization rates of human...

We study optimal linear income taxation in a model with heterogeneous agents where earnings potentials are endogenously determined through human capital accumulation. Agents differ in initial conditions and ability to learn. Capital market imperfections prevent poor agents to invest optimally in...

The Netherlands has a unique tradition in which all major Dutch political parties provide CPB Netherlands Bureau for Economic Policy Analysis with highly detailed proposals for the tax-benefit system in every national election. This information allows us to quantitatively measure the...

We consider models where the Ramsey-optimal fiscal policy under Full Commitment (FC) is time-inconsistent and define a new notion of optimal policy, Limited-Time Commitment (LTC). Successive one-period lived governments can commit to future plans over a finite horizon. We provide a sufficient...