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We consider a two-period overlapping generation model with rational altruism à la Barro, where time transfers and bequests are available to parents. Starting from a steady state where public spendings are financed through taxation on saving income, labor and consumption, we analyze a tax reform that consists in a shift of the tax burden from saving income tax towards inheritance tax, leaving the capital-labor ratio unchanged. In the standard Barro model with no time transfer and inelastic labor supply, such a policy decreases steady-state welfare. We assume the young have elastic labor supply and can receive time transfers from their parents. Then inheritance tax modifies the trade-off parents make between both kind of private transfers, and may increase steady-state welfare.
