How is the optimal level of Pigouvian taxation influenced by distributive concerns? With second-best instruments, a higher level of income redistribution calls for a lower level of Pigouvian taxation. More redistribution implies higher distortions from income taxation. Pigouvian tax revenues...

We develop a unifying framework for optimal income taxation in multi-activity economies with general production technologies. Agents are characterized by an N-dimensional skill vector that captures intrinsic abilities in N activities. The private return to each activity depends on individual...