Researchers at the German Institute for Economic Research (DIW) have put forward the idea of instituting a universal basic inheritance, which would see citizens receive 20,000 euros at the age of 18, to help overcome inequalities in wealth in the country.
DIW suggests introducing Universal Basic Inheritance
Could German children soon receive the best present on their 18th birthday? In December, the German Institute for Economic Research proposed to introduce a universal base inheritance (Grunderbe), a program under which 20,000 euros would be paid to each German resident when they reached adulthood, to combat wealth inequality in Germany.
Beneficiaries would be free to do whatever they want with the money, whether it’s furthering their education, buying a home or starting a business. Recipients could save or invest the money, or just spend it as they see fit.
The inheritance would be financed by wealth tax
DIW tax expert Stefan Bach estimated that, based on 750,000 residents turning 18 each year, the state succession regime would cost the German government around €22.6 billion per year. “If we really want to create prosperity for everyone for the foreseeable future, we must reduce the high level of wealth inequality through redistribution,” Bach wrote in his proposal.
The universal basic inheritance would be financed by taxation, in particular inheritance taxes and taxes on large fortunes. The government could also introduce property tax reforms to finance it, and taxes on extremely high wage earners.
The German government should not raise taxes
The state inheritance proposals follow growing concerns over the distribution of wealth in Germany. The richest 10% own 67% of all private wealth in Germany, with the richest 1% owning 35%. On the other hand, the bottom half of the country’s earners own only 1.3% of all private wealth.
Bach said simulations revealed universal basic inheritance would lead to a 5-7% drop in the Gini coefficient, a value used to represent wealth or income inequality within a nation. It would also increase the wealth of the lowest earners by 59-94%.
However, the scheme is unlikely to be implemented by the current German government, which has excluded tax increases from its coalition agreement. There is also strong resistance from those who would have to pay the wealth taxes intended to fund the scheme.