This paper develops a Mirrlees (1971) framework with heterogeneous agents to analyze optimal redistributive taxes, optimal provision of public goods and the marginal cost of public funds (MCF). Standard MCF measures are shown to suffer from three defects: i) The MCF for the (non-individualized)...

This paper aims to provide a perspective on the ideal tax system using insights from optimal-tax theory supplemented with empirical evidence. These insights are applied to actual policy questions regarding the progressiveness of the labor income tax, in-work tax credits, the design of the...

This paper aims to provide a perspective on the ideal tax system using insights from optimal-tax theory supplemented with empirical evidence. These insights are applied to actual policy questions regarding the progressiveness of the labor income tax, in-work tax credits, the design of the...

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...

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...

This paper studies how linear tax and education policy should optimally respond to skill-biased technical change (SBTC). SBTC affects optimal taxes and subsidies by changing i) direct distributional benefits, ii) indirect redistributional effects due to wage-(de)compression, and iii) education...

There is increasing empirical evidence that people systematically differ in their rates of return on capital. We derive optimal non-linear taxes on labor and capital income in the presence of such return heterogeneity. We allow for two distinct reasons why returns are heterogeneous: because...

This paper extends the Diamond (1980) model with labor unions to study optimal income taxation and to analyze whether unions can be desirable for income redistribution. Unions bargain with firms over wages in each sector and firms unilaterally determine employment. Unions raise the efficiency...