Half of the jobs in the U.S. feature pay-for-performance. We derive novel incidence and optimum formulas for the overall rate of tax progressivity and the top tax rates on total earnings and bonuses, when such labor contracts arise from moral hazard frictions within firms. Optimal taxes account...

We extend Simula and Trannoy's (2012) model on optimal income taxation under the threat of migration to include indirect taxation. This has allowed finding that: 1) the tax schedule is also influenced by the magnitude of commodity taxes and subsidies; 2) optimal income tax rates are higher than...

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...

In 1992, the Treasury Department proposed a comprehensive business income tax, or CBIT, as a reform option for the taxation of business income. In Treasury's proposal, all taxes on business income (including income of sole proprietorships) would be replaced by a flat, entity-level tax. Interest...

In the literature on optimal taxation, a “tag” is a government-observable taxpayer attribute that is effectively immutable – like blindness, race, gender, or even height. Conventional optimal tax theory prescribes that tags should be included in the tax base so long as they are in some way...

We study fair and efficient tax-benefi t schemes based on income and non-income factors under partial control. Partial control means that each factor is a speci fic mixture of unobserved ability (randomly drawn by nature) and effort (chosen by individuals who differ in tastes). Factors differ in...

Chamley (1986) and Judd (1985) showed that, in a standard neoclassical growth model with capital accumulation and infinitely lived agents, either taxing or subsidizing capital cannot be optimal in the steady state. In this paper, we introduce innovation-led growth into the Chamley-Judd...

Gender based taxation (GBT) has been recently proposed as a promising policy in order to improve women's status in the labour market and within the family. We use a microeconometric model of household labour supply in order to evaluate, with Italian data, the behavioural and welfare effects of...

This paper explores how the specification of the earnings function impacts the optimal tax treatment of human capital. If education is complementary to labor effort, education should be subsidized to offset tax distortions on labor supply. However, if most of the education is enjoyed by high...

Should a redistributive government optimally subsidize education to provoke a reduction in the skill premium through general equilibrium effects on wages? To answer this question, this paper studies optimal linear and non-linear redistributive income taxes and education subsidies in two-type...