Abstract: The consumption baskets of rich and poor households contain different types of goods. However, the standard approach in progressive taxation literature ignores this fact (i.e., uses homothetic consumption preferences). In this paper, I analyze the role of differences in consumption baskets across income groups to evaluate the effects of redistributive taxation on efficiency and inequality. I develop a static multi-sector general equilibrium model with progressive income taxation, non-homothetic consumption preferences, and endogenous labor supply, capturing the cross-sectional differences in the compositions of households' consumption baskets. I find that with non-homothetic consumption preferences, a planner's choice of labor income tax progressivity is lower than the standard approach. Using a utilitarian social welfare criterion, I also find that the optimal U.S. income tax is well approximated by a proportional income tax rate of around 14.5%. Instead of income taxation, similar welfare gains can be achieved by implementing the planner's choice of product-specific consumption taxation.