We review the literature linking taxation and sustainable forest management (SFM) in humid tropical forests. This literature broadly falls in two strands. One emphasizes economic theoretical ideals and seeks to define optimal taxation designs with incentives for SFM. The other strand documents political-economic empirical realities that fall far from the theoretical ideals and which may help explaining why taxation reforms for SFM have had mixed outcomes. We conclude that future research could benefit from further integration and interaction between the two strands and argue for dynamic forest taxation policies that can respond to changing market demands, technologies, and context conditions to provide the right incentives and signals for SFM.