Marcel Fratzscher, head of the German Institute for Economic Research (DIW), has asserted that the marked increase in tax revenue generated from inheritances and bequests is a clear indicator of accelerating wealth inequality and a critical need for tax reform. Speaking to the “Rheinische Post”, Fratzscher noted that this trend highlights both the large and growing assets of the Baby Boomer generation and the unusually high wealth disparity present in Germany.
The economist stressed that this issue is highly relevant to current debates, such as pension reform, where he observes that resources are increasingly being redistributed from younger generations to older ones, rather than imposing a heavier tax burden on the substantial wealth and incomes held by Baby Boomers.
Fratzscher pointed out that while almost 500 billion Euros were transferred through gifting and inheritance last year, tax collections only amounted to four percent of that total. This figure, he argued, underscores how minimally wealth, particularly inheritances and bequests, is taxed in Germany. He stated it is “simply unviable” that earned income in Germany is taxed up to 45 percent, with most consumption at 19 percent, while inheritances and bequests are taxed at only four percent.
According to the DIW president, this low level of taxation on inheritances fundamentally contradicts the principle of meritocracy. He argued that since inheritances and gifts constitute unearned income, they should logically not be taxed less heavily than income derived from work.
