This paper examines a Pareto-improving transition to an optimal tax steady state from a given non-optimal tax steady state. In contrast to the existing view on this issue, it is shown that, under certain conditions and provided that debt policy is available, the Pareto-improving transition to the desired optimum is always possible. In order to do this, we provide a dynamic general equilibrium model of overlapping generations, in which an expenditure tax is always optimal in a steady state, but in which the economy is initially in a non-optimal income tax steady state. We also study the characteristics of transitional fiscal policies which ensure such a Pareto-improving transition.