We study optimal income taxation and public-goods provision under the assumption that the cross-section distributions of
productive abilities or public-goods preferences are not known a priori. A conventional Mirrleesian treatment is shown to provoke
manipulations of the policy mechanism by individuals with similar interests. The analysis therefore incorporates a requirement of
coalition-proofness. The main result is that increased public-goods provision is associated with a more distortionary and a more
redistributive tax system. With a conventional Mirrleesian treatment, the level of public-goods provision is not related to how distortionary
or redistributive the tax system is.
Bierbrauer, Felix J.
"Optimal Tax and Expenditure Policy with Aggregate Uncertainty."
American Economic Journal: Microeconomics,
Asymmetric and Private Information; Mechanism Design
Taxation and Subsidies: Efficiency; Optimal Taxation
Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies