Financial, real estate and business assets are the dominant forms of wealth in society.
(Photo: imago/CHROMORANGE)
Inheritance taxes are unpopular. This is understandable for the wealthy. But surprisingly, many people oppose the tax who will never be affected due to lack of wealth. Arguments are usually given that are aimed at the individual property owners and their children. The tax reflects the envy of the successful, it is double taxation, the tax is irreverent and would jeopardize family solidarity.
These arguments fall short and miss the actual problem. Because it is not about the individual wealth owners, but about the structure of society. The inheritance tax is intended to create balanced starting conditions for each generation. This is a fundamentally liberal concern. Without such a correction, private wealth becomes more and more concentrated and life chances become more and more dependent on origin.
In the fight against feudalism, liberalism promised that achievements, not origins, should count for success. Land ownership should be included in the market process. The aristocratic right of inheritance, with which land ownership mostly went undivided to the eldest son, was abolished.
Land ownership plays a much smaller role today. Financial, real estate and business assets are the dominant forms of wealth in our society. If these are passed on undiminished from generation to generation, this can also lead to the social structure becoming ossified. This does not only apply to the major heirs of important companies. It also applies to young people’s chances of buying their own home if their parents contribute the necessary equity – or not.
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The fact that wealth is passed on unhindered across generations leads to a polarization of wealth and thus of life chances. The increase in wealth over the past 40 years in Germany has only benefited the upper and upper middle classes. The wealth of the lower half of the population stagnated and their share of total wealth decreased.
Jens Beckert is Director at the Max Planck Institute for the Study of Societies.
(Photo: David Ausserhofer)
Paradoxically, this development does not lead to the population supporting inheritance taxation, but contributes to its rejection. If life chances depend on the wealth of parents and grandparents, those who have wealth or hope for an inheritance do not want the state to take away their life chances.
An inheritance tax that would finance educational equality or a basic inheritance for all young people would be desirable from a regulatory point of view, but remains highly unlikely. Unequally distributed wealth encourages rejection of reforms that could make wealth less unequally distributed.
More: This is how the tax models of the richest families in Germany work.