In a new model with incomplete markets, I quantitatively determine tax reforms that are welfare improving, distributionally neutral, and leave the budget balance unchanged in the long run. I consider a new reform. I eliminate capital income taxation and replace it with progressive consumption...

In a partial equilibrium setting without price uncertainty, the balanced-budget substitution of an ad valorem tax on output for a specific (unit) tax can enhance welfare in imperfectly competitive markets and is without impact in a competitive world. This paper demonstrates that a substitution...