We develop models of optimal linear and non-linear income taxation with endogenous human capital formation to explore optimal education subsidies. Optimal subsidies on education ensure efficiency in human capital accumulation and thus play an important role in alleviating the tax distortions on...

Progressive income taxes moderate wage demands by trade unions and thereby reduce unemployment, but alsothey reduce incentives to acquire skills and lower productivity of workers. The optimal response of the governmentto this dilemma is to choose a system of progressive taxes and to (partly)...

This paper analyses the national tax treatment of interestexpenditures of multinational enterprises in a non-cooperative world. It is shown that the international tax systemgenerally leads to distortions in the capitaldecisions of multinational firms. In contrast to the existingliterature on the...

We argue that promoting education may be a means to reduceincome inequality. When workers of different skill levels areimperfect substitutes in production, an increase in the level ofhuman capital in the economy reduces the return to education.Hence, a given compression of after-tax incomes can...

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...

In a Mirrleesian environment, a monopsonist sets hourly wages and individuals choose how many hours to work. Labor market outcomes do not only depend on the level and slope of the income tax function, but also on its curvature. A more concave tax schedule raises the elasticity of labor supply,...

This paper studies the implications of monopsony power for optimal income taxation and welfare. Firms observe workers' abilities while the government does not and monopsony power determines what share of the labor market surplus is translated into profits. Monopsony power increases the tax...