The article discusses how tax policies in small and open economies are influenced by international trade and financial openness. It explores how different types of economies respond to tax policies and the impact on distribution and efficiency. The research highlights the importance of considering economic openness when designing optimal tax policies. It also examines how factors like labor unions, housing investment, and market imperfections affect tax policy decisions. The study suggests that in economies with high capital mobility, it is more efficient to tax labor directly rather than through capital income taxes.