German economists propose 20.000-euro state inheritance for 18-year-olds

German economists propose 20.000-euro state inheritance for 18-year-olds

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 upon turning 18, to help overcome wealth inequality in the country.

DIW suggests introducing Universal Basic Inheritance

Could German children soon be in for the best 18th birthday present ever? In December, the German Institute for Economic Research suggested introducing a Universal Basic Inheritance (Grunderbe), a scheme whereby 20.000 euros would be given to every German resident upon reaching adulthood, to tackle wealth inequality in Germany.

Recipients would be free to do what they want with the money, whether it be for further education, buying a house or starting a business. Recipients would be able to save or invest the money, or simply spend it as they see fit.

Inheritance would be financed through wealth tax

DIW tax expert Stefan Bach estimated that, based on 750.000 residents turning 18 every year, the state inheritance scheme would cost the German government around 22,6 billion euros a year. "If we really want to create prosperity for everyone in the foreseeable future, then we should reduce the high level of wealth inequality through redistribution,” Bach wrote in his proposal.

Universal Basic Inheritance would be financed through taxation, specifically inheritance tax and taxes on large fortunes. The government could also introduce reforms to property tax to finance it, and taxes on earners with extremely high salaries.

German government not likely to raise taxes

The proposals for state inheritance come on the back of growing concerns regarding the distribution of wealth in Germany. The richest 10 percent own 67 percent of all private wealth in Germany, with the top 1 percent owning 35 percent. On the other hand, the bottom half of earners in the country own just 1,3 percent of all private wealth.

Bach said that simulations have revealed Universal Basic Inheritance would lead to a 5 to 7 percent fall in the Gini coefficient, a value used to represent wealth or income inequality within a nation. It would also raise the wealth of the lowest earners by between 59 and 94 percent.

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 major resistance from those who would have to pay the wealth taxes meant to finance the scheme.

William Nehra


William Nehra

William studied a masters in Classics at the University of Amsterdam. He is a big fan of Ancient History and football, particularly his beloved Watford FC.

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