Financing retirement benefits is probably the most significant fiscal challenge that governments in industrial economies will be facing in the next few decades. Social security reform has therefore become an important public policy issue for many countries and various reform proposals have been...

In this paper we argue that it might not be such a bad idea to tax capital income in the long run. We address this question in an environment in which individuals are finitely lived and face uninsurable idiosyncratic labor income risk. In choosing a tax system a benevolent planner trades off...