Berlin, 10 November 2023. Without political intervention, the concentration of wealth at the top will continue to increase significantly in the coming years. According to simulations, the share of total wealth held by the richest ten per cent of Germans would rise from just over 60 per cent recently to around 67 per cent by 2027. This is the result of estimates based on a new wealth simulator developed by a group of researchers led by Timm Bönke and Charlotte Bartels of DIW Berlin in cooperation with the Forum New Economy.

The wealth simulator, which was presented by the Forum New Economy on Friday, makes it possible for the first time to determine the effects of various measures on the actual distribution of wealth in Germany. The calculator, which can be used interactively via a website, also makes it easier to assess whether and to what extent instruments such as seed capital or a wealth or inheritance tax could halt this trend.

According to the simulation, the distribution of wealth would be most affected if every 20-year-old was given a starting capital (basic inheritance). The money could be used for specific purposes such as pensions or education. With a payout of 20,000 euros per person, the share of total wealth held by the bottom half of the population would already be significantly higher after ten years than it would be without the payout - although the percentage share would still be relatively low at 3 per cent. With a starting capital of 60,000 euros, the share of the richest 10 per cent would be significantly lower at 61 per cent than without the payout. With a starting capital of 100,000 euros, the share would even fall to 57 per cent - instead of rising to 67 per cent. The share of the lower half of the population would be four percentage points higher than otherwise. A starting capital of 10,000 euros would cost the state an average of 8.5 billion euros per year. If every 20-year-old were provided with 100,000 euros for retirement, education or home ownership, this would amount to a good 85 billion euros per year.

According to the simulator, a wealth tax would raise additional revenue. However, a rate of one or two per cent would not noticeably slow the increase in wealth inequality over ten years. From a rate of 2 per cent, the share of the richest would fall slightly, but the share of the bottom half would not change. An increase in inheritance tax under current law would have no noticeable effect on the actual distribution of wealth over the whole range of possible tax rates. One of the reasons cited by the researchers for this is that only 30 per cent of Germans ever receive an inheritance or gift during their lifetime. According to additional test simulations, significant effects would only occur after a period of 40 years. At a rate of 30 per cent, the annual income would amount to 3.6 billion euros. The simulations did not take into account the impact of abolishing the inheritance tax exemption for business assets.

"Taking something away from a few people's inheritance later in life does little to reduce wealth inequality," said Charlotte Bartels. "Precisely because wealth is so highly concentrated in Germany, inequality can only be noticeably reduced if those who have nothing are given massive help to build up their wealth," she said.

The Forum New Economy's wealth simulator was developed in a multi-year project led by Timm Bönke and Charlotte Bartels in consultation with leading inequality experts. The data basis for the micro-simulation model are the results of surveys of households conducted by the Socio-Economic Panel at DIW Berlin. The project was funded by the Robert Bosch Stiftung.

"Wealth inequality is high in Germany, too high in the eyes of many citizens," said Ellen Ehmke, Senior Expert on Inequality at the Foundation. "However, it is not easy for political decision-makers to find out which measures are suitable for reducing wealth inequality. The wealth simulator now provides initial answers and thus new material for the deadlocked debate."