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Universal Capital Endowment and Wealth Taxes Could Reduce Wealth Inequality

Author

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  • Stefan Bach

Abstract

Wealth is very unequally distributed in Germany. To effect a long-term reduction, the new Federal Government could focus on more effectively promoting home ownership, supplementary retirement provision, and other precautionary savings. However, a universal capital endowment could decrease wealth inequality much more rapidly and successfully. In this report, a universal capital endowment of up to 20,000 euros is simulated, which is granted to everyone 18 and older. These programs, which would require around 22.6 billion euros annually, could be financed by increasing the inheritance tax, implementing a recurrent wealth tax on the ultra wealthy, and taxing real estate properties more effectively. A universal capital endowment, which primarily increases the wealth of the lower and middle classes, paired with wealth taxes would significantly reduce wealth inequality in Germany: Simulations show that the Gini coefficient would decrease by five to seven percent as a result.

Suggested Citation

  • Stefan Bach, 2021. "Universal Capital Endowment and Wealth Taxes Could Reduce Wealth Inequality," DIW Weekly Report, DIW Berlin, German Institute for Economic Research, vol. 11(49-52), pages 379-387.
    • Handle: RePEc:diw:diwdwr:dwr11-49-1
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.831695.de/dwr-21-49-1.pdf
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    Cited by:

    1. Alexander Krenek & Margit Schratzenstaller-Altzinger & Klaus Grünberger & Andreas Thiemann, 2021. "INTAXMOD – Inheritance and Gift Taxation in the Context of Ageing," WIFO Working Papers 645, WIFO.
    2. Margit Schratzenstaller, 2023. "Behavioral Responses to Inheritance Taxation. A Review of the Empirical Literature," WIFO Working Papers 668, WIFO.

    More about this item

    Keywords

    Wealth formation; capital endowment (minimum inheritance); wealth taxation; wealth distribution;
    All these keywords.

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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