Stone Centre Conference on Optimal Taxation and Redistribution recap

The Stone Centre Conference on Optimal Taxation and Redistribution brought together leading scholars from Europe and the United States to examine how modern tax systems can confront inequality, risk, and institutional constraints.

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The conference was organised by Deniz Kattwinkel (UCL), Alan Olivi (UCL), and Vasiliki Skreta (UCL, UT Austin, CEPR, and NBER) under the auspices of the Stone Centre at UCL and in collaboration with the Institute for Fiscal Studies (IFS) and the UCL Policy Lab. The programme brought together many of the leading voices in modern optimal taxation, alongside a cohort of highly regarded younger scholars. The resulting line-up was both rare and intellectually ambitious, reflecting the Centre’s commitment to advancing research at the frontier of inequality and public economics.

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A pre-conference policy session, organised with the UCL Policy Lab, grounded the discussions in the contemporary UK debate on structural tax reform (https://www.ucl.ac.uk/policy-lab/news/2025/dec/tax-reform-and-british-economy). Participants stressed that meaningful reform requires more than marginal rate adjustments. It demands institutional redesign, credible transition paths, and political sustainability. This framing carried through the conference as a whole. Across sessions, a consistent theme emerged: optimal taxation today is less about isolated rate-setting and more about designing institutions capable of addressing inequality in complex, market-based economies.

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The conference attracted many faculty and researchers from across UCL, the IFS, and multiple UK universities, fostering discussion across research groups and subfields. The engagement throughout reflected both the depth of the programme and the continued appetite for rigorous dialogue on redistribution and institutional design.

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Capital, Entrepreneurship, and Wealth Concentration

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Several contributions examined how capital taxation interacts with entrepreneurship and wealth accumulation. Florian Scheuer (University of Zurich) presented work on capital gains taxation and entrepreneurship that highlights a central tension. Capital gains taxes can reduce founders’ incentives by lowering the rewards from successful exits, yet they also shape how firms are financed, how ownership is diluted, and how risk is allocated. The analysis clarifies when capital taxation discourages innovation and when it primarily affects the structure and timing of exits. The broader implication is that tax design influences not only the distribution of wealth, but also the process through which wealth is created.

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Balancing this perspective, Nicolas Werquin (Federal Reserve Bank of Chicago) presented evidence on extreme poverty in wealthy nations. Using detailed administrative data, the research shows that severe deprivation persists even in advanced economies and may not be fully captured by conventional income measures. Taken together, these contributions underscore the breadth of contemporary inequality challenges: wealth concentration at the top coexists with persistent hardship at the bottom, and both raise difficult questions for tax and transfer systems.

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Redistribution Beyond Taxes

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The conference also emphasised that redistribution operates through institutional design, not solely through tax schedules. Piotr Dworczak (Northwestern University) demonstrated that governments frequently redistribute through market mechanisms such as price regulation, subsidies, or allocation rules. These tools can complement income taxation, particularly when information constraints limit what can be achieved through rate changes alone. The analysis broadens the set of instruments available for shaping distributive outcomes.

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Frank Yang (Harvard University) examined how screening and administrative design influence who ultimately receives support. Application procedures, eligibility checks, and compliance requirements act as implicit filters, shaping participation and outcomes. The distributive impact of a programme may therefore depend as much on its administrative architecture as on its statutory generosity. These insights highlight the importance of policy design details in determining who benefits and who is left out.

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Risk, Social Insurance, and Economic Security

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Another cluster of papers examined how tax systems interact with economic risk and labour-market instability. Antoine Ferey (Sciences Po) analysed the joint design of income taxation and unemployment insurance, highlighting how these instruments must be coordinated to balance redistribution and work incentives in the presence of labour-market uncertainty. Christian Hellwig (Toulouse School of Economics) explored the dynamic structure of social insurance, emphasising that individuals face evolving risks over time and that optimal systems must adapt accordingly. Chris Sleet (University of Rochester) incorporated transitional dynamics into tax reform, showing that the path of adjustment can shape both welfare outcomes and political viability.

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Collectively, these contributions emphasise that inequality is not only a static distributional issue but also a question of exposure to risk and the capacity of institutions to provide security without undermining opportunity.

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Political Feasibility and Durable Reform

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Several papers placed political constraints at the centre of tax design. Felix Bierbrauer (University of Cologne) examined how tax reforms can be structured to command broad support, recognising that redistribution must be politically sustainable to endure. Pierre Boyer (École Polytechnique) analysed the taxation of couples and the conditions under which institutional reform becomes feasible. Maren Vairo (Princeton University) explored healthcare reform through the lens of electoral incentives and coalition formation.

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These contributions reinforce a central lesson: durable reform requires more than normative justification. It requires attention to coalition dynamics, perceived fairness, and the sequencing of institutional change.

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Markets, Matching, and the Distribution of Opportunity

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Finally, the conference highlighted that taxes operate within interconnected markets. Mikhail Golosov (University of Chicago) examined how taxation influences outcomes in matching environments, where individuals’ decisions are interdependent and where taxes can reshape how surplus is divided. Job Boerma (University of Wisconsin–Madison) provided tools for understanding how technological change and policy alter occupational allocation and earnings patterns.

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These perspectives broaden the understanding of tax incidence. Redistribution cannot be fully evaluated without accounting for how policy reshapes economic interactions and opportunities across the distribution.

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Concluding Reflections

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Across diverse topics—capital taxation, poverty measurement, social insurance, political feasibility, and market design—the conference conveyed a coherent message. The frontier of optimal taxation is increasingly concerned with institutional realism and distributional consequences. It integrates entrepreneurship and wealth concentration, administrative capacity, labour-market risk, and political sustainability into a unified research agenda.

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The quality and breadth of the contributions reflected the intellectual vitality of the field. The discussions demonstrated how rigorous theoretical work, when paired with institutional awareness, can meaningfully inform the design of fair and resilient economic systems.

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The intellectual quality of the programme, combined with the breadth of participation from UCL, IFS, and other UK institutions, generated strong engagement throughout. There was clear enthusiasm among participants for a follow-up event to continue these conversations and deepen collaboration across institutions.

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Audience reactions:

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“Bringing together the very best economic theorists working on tax design, this remarkable conference 'Optimal Taxation and Policy Design', sponsored by the Stone Centre at UCL and IFS, broke new ground in advancing our understanding of how to improve tax policy using frontier ideas from economic theory.”

Richard Blundell (UCL, IFS)

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“The IFS-Stone-UCL workshop on Optimal Taxation and Policy Design in December 2025 offered a diverse mix of perspectives on the topics of the conference.  It provided a great and rare platform for exchanges and communication between theory, empirics, and policy scholars.  I learned a lot from it!”

Aureo de Paula (UCL, IFS)

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“This was a spectacular conference bringing together leading theoretical and applied researchers advancing the frontiers of knowledge on public finance and redistribution. The mix of researchers, the focus of the programme, the depth of knowledge of the participants, and the quality of work presented enabled deep and powerful interactions generating a large range of theoretical and empirical research ideas.”

Lars Nesheim (UCL, CEMMAP)

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“Optimal Taxation and Policy Design is the best conference on public economics I have attended in a long time. It brought together the best scholars working on taxation and redistribution, and provided an invaluable platform for exchange of ideas and dissemination of research.”

Mikhail Golosov (University of Chicago)

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“The Stone Centre Conference on Optimal Taxation and Policy Design (London, December 18–19, 2025) was genuinely one of a kind. It brought together top-notch researchers from economic theory and public finance—two communities that rarely interact despite clear overlaps in interests—and the mix worked unusually well. The organisers did an excellent job selecting papers that were highly complementary across these fields, which made the discussions sharper and the connections more immediate than at most conferences. The atmosphere was energetic and collaborative, and the cross-field exchanges were a clear highlight for many participants. I would be very happy to attend this conference again.”

Piotr Dworczak (Northwestern University)

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“The conference was a unique setting, a gathering of world leading researchers working in the intersection of theory, public finance, and macroeconomics. These scholars explored issues that are of first-order relevance and importance to the biggest questions of our time, especially relating to causes, consequences, and solutions to inequality. What was particularly valuable was the richness and diversity of approaches and methods, generating great payoffs for participants and opening paths to fruitful future collaborations. Highly recommended!”

Lukasz Rachel (UCL, UCL Policy Lab)

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