Journal of Tax Research

Taxation is a legitimate and generally accepted approach for funding governments' expenditures. Tax reforms have impacts on production modes and income distribution which in turn furnishes profound changes in economy's performance. Taxation results in deadweight loss, hence economic policy should take into account the impacts of tax reform. Using a 55-period Auerbach-Kotlikoff Overlapping Generation Model, this study tries to simulate tax policy in order to calculate the current and future generations' welfare impacts of the tax reform in Iran. The results of the model show that changing from tax base[1] and capital income tax to consumption tax can raise individuals' welfare by 6.2%, while changing from tax base and labor income tax to consumption tax can raise individuals' welfare by10%.