We give an objective meaning to the concept of taxable capacity and establish a theoretical link between Optimal Taxation Theory (OTT) and the proposals of the Carter and Meade Reports, solving at the same time Kay’s (2008) criticism to both approaches.

This paper concerns optimal taxation and public goods in an economic federation with decentralized leadership, where one lower level government is the first mover also in the horizontal dimension. Under plausible assumptions, horizontal leadership reinforces the incentives created by...

The Samuelson tax is a neutral business income tax on the normal return on capital only. I discuss two modifications of the Samuelson tax in order to include pure profits in its tax base, but still achieve neutral business taxation.