Efficient redistribution

• We characterize the optimal shape of non-linear income and wealth taxes. Our model reproduces distribution in United States a dynamic general equilibrium setting. find that uniform flat tax on capital labor combined with lumpsum transfer is nearly optimal. The incremental welfare gains from steeper marginal taxes are small, especially when planner has strong preference for redistribution What taxes? answer this question using uninsurable idiosyncratic risk. analysis takes into account long-lived transition dynamics after policy reforms. lump-sum redistribution, due to behavioral effects.