Yet another reason to tax goods

Golosov et al. [2003. Optimal indirect and capital taxation. Review of Economic Studies 70 (3), 569–587] have extended Atkinson and Stiglitz's uniform tax prescription to a dynamic Mirrlees [1971. An exploration in the theory of optimal income taxation, Review of Economic Studies 38, 175–208] economy under the assumption that the government fully controls the agents' savings. When savings are not controlled by the government we show that the result is no longer valid: separability is not sufficient to guarantee that uniform taxes are optimal. If, beyond being separable, preferences over consumption bundles are quasi-homothetic, constrained efficiency of uniform taxes is restored. We also show that optimal taxes on the returns of capital are, in general, different from zero.