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...

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...

Judd's (1985) finding that the optimal long-run rate of tax on capital is zero—even if equity is an important social objective—has exerted substantial influence in academic and policy circles over the last quarter century. Only very recently has it become clear that Judd's zero-tax result...

The literature on optimal redistributional instruments begins with the assumption that society has some preference for equality, leaving the precise degree unspecified. It then asks: How should society pursue that preference? More specifically, what kinds of policy instruments — whether...

In 1927 the mathematician Frank Ramsey published a paper on optimal taxation in which he put forward what has come to be known as the “Ramsey rule”. Nearly one hundred years later, Ramsey’s paper remains a go-to reference for normative tax theory in a number of fields, including legal...

In the literature on optimal taxation, a “tag” is a government-observable taxpayer attribute that is effectively immutable – like blindness, race, gender, or even height. Conventional optimal tax theory prescribes that tags should be included in the tax base so long as they are in some way...

A kind of folk theorem in tax policy states that too much uncertainty about the impact of taxing (or subsidizing) a particular taxable attribute is cause for excluding that attribute from the tax base. I extend the optimal tax model to test this hypothesis. In my model, the government is not...

This paper is concerned with the question of how couples should be taxed. One reason for the importance of this issue is simply that the overwhelming majority of individuals live in households formed around couples, and so it could be argued that empirically, this is the single most important...

We study taxation externalities in federations of benevolent governments. Where different hierarchical government levels tax the same base, one can observe two types of externalities: a horizontal externality, working among governments of the same level and leading to tax rates that are too low...