This paper undertakes a normative investigation of the quantitative properties of optimal tax smoothing in a business … finds it optimal to adjust labour income tax rates so that the average net returns to skilled and unskilled labour hours …

that, relative to the other tax reforms, capital tax cuts lead to the highest aggregate welfare but are skill-biased and … labour, falls in the capital tax can result in welfare losses for unskilled workers, even in the absence of other frictions … show that including the transition period in the welfare evaluation lowers the inequality effects of capital tax reduc …

benevolent government, which cares equally about its citizens, to tax capital heavily and to subsidise labour; (ii) a Pareto …