This paper studies the optimal design of fiscal limits in the context of a simple political economy model. The model features a single politician and a representative voter. The politician is responsible for choosing the level of public spending for the voter but may be biased in favor of...

This paper studies optimal dynamic tax policy under the threat of political reform. A policy will be reformed ex post if a large enough political coalition supports reform; thus, credible policies are those that will continue to attract enough political support in the future. If the only...

We characterize optimal policies in a multidimensional nonlinear taxation model with bunching. We develop an empirically relevant model with cognitive and manual skills, firm heterogeneity, and labor market sorting. The analysis of optimal policy is based on two main results. We first derive an...

We study optimal taxation in a model with endogenous financial frictions, risky investment and occupational choice, where the distribution of wealth across entrepreneurs affects how efficiently capital is used. The planner chooses linear taxes on wealth, capital and labor income to maximize the...

This paper explores the characteristics of individual portfolio holdings in a world economy with a unified securities market where there are many countries, each with its own tax rates and inflation rate. When nominal interest is taxable but income to equity owners is tax exempt in all...

This paper analyzes the effect of taxation on the intertemporal allocation of an exhaustible resource. A general framework within which a large variety of taxes can be analyzed is developed and then applied to a number of specific taxes. It is shown that there exists a pattern of taxation which...

This paper reviews recent advances in the study of dynamic taxation, considering three main approaches: the dynamic Mirrlees, the parametric Ramsey, and the sufficient statistics approaches. In the first approach, agents' heterogeneous abilities to earn income are private information and evolve...

The normative principle of benefit-based taxation has exerted substantial influence on many areas of public finance, but it has been largely set aside in the modern theoretical approach to optimal income taxation, where welfarist objectives dominate. A prerequisite for that gap to close is the...