Optimal Taxation

In "Optimal Taxation in Theory and Practice" Mankiw, WeinZierl, and Yagan deals with the optimal design of tax systems.

The eight lessons from tax theory for optimal taxation are:

1. Optimal marginal tax rate schedules (or tax list applied to income level) depend on the distribution of ability (talent: ability to earn);
2. Optimal marginal tax schedule could decline at high incomes;
3. A flat tax, with a universal lump-sum (single payment), could be close to optimal;
4. The optimal extent of redistribution (take money from someone and give to someone else) rises with wage inequality;
5. Taxes should depend on personal characteristics as well as income;
6. Only final good ought to be taxed, and typically they ought to be taxed uniformly;
7. Capital income ought to be untaxed, at least in expectation;
8. In stochastic (conjectural or random) dynamic economies, optimal tax policy requires increased sophistication.