Abstract :
The paperstudiesafiscalpolicyinstrumentthatcanreducefiscaldistortionswithoutaffectingrevenues,inapoliticallyviableway.The
instrumentisa private contract(taxbuyout),offeredbythegovernmenttoeachcitizen,wherebythecitizencanchoosetopayafixed
price inexchangeforagivenreductioninhertaxrateforaperiodoftime.Weintroducethetaxbuyoutinadynamicoverlapping
generationseconomy,calibratedtomatchseveralfeaturesoftheUSincome,taxesandwealthdistribution.Undersimplepricing,the
introductionofthebuyoutisrevenueneutralbut,byreducingdistortions,benefitsasignificantfractionofthepopulationandleadsto
sizableincreasesinaggregatelaborsupply,incomeandconsumption
