This paper explores the use of workfare as part of the optimal tax mix. When agents have preferences that are quasilinear in leisure, unproductive workfare is optimal only if an optimal nonlinear tax scheme in the absence of workfare would feature distortions at the bottom of the wage...

In the design of the optimal direct/indirect tax mix, the canonical view was laid by Atkinson and Stiglitz (1976) who showed that commodity taxes are unnecessary in an economy in which there is an optimal nonlinear income tax provided that commodities are separable from labor in the utility...