“…2 A considerable literature has built on the assumption of tax distortion. In addition to those already noted, see, for example, Atkinson & Stiglitz (1976), Browning (1976Browning ( , 1994, Coleman (2000), Debreu (1954), Gradstein (1999), Harberger (1964, 1971, Hotelling (1938), Kay (1980), Lau (1978), Martina (2000), Samuelson (1986), Sandmo (1976), andStutzer (1982). 3 Following Marshall's way of presenting lost surplus, I will usually treat the marginal cost as constant and the supply curve thus horizontal.…”