Changing Ideas

During the high-times of market-liberalism, inequality was either considered as a necessary by-product of a functioning market economy, and even a useful incentive to work and develop new skills. Or it was seen as transitory, as wealth created by the top earners would “trickle down” to those at the bottom. Since the 1980s, this belief in “trickle-down” led numerous countries to lower top income and wealth taxes.

Contrary to the theory, inequality has in reality grown considerably during the last decades, most notably in the US and the UK. In Germany, inequality has reached levels not seen for decades that have started to undermine political confidence. The total share of income of the top 10% of households has risen from less than 30% in the late 1960s to more than 40% today. A new consensus and paradigm is now emerging around the need to correct an obviously inherent trend to rising inequality in market economies. Which instruments best fit is still under exploration. This website is aimed to enlighten the search by presenting basic information, literature and a calculator designed to estimate the impact of different possible measures on the effective wealth distribution.

When it comes to rich and poor, this is always a source of emotion - and heated arguments about whether a wealth tax or inheritance tax would help. Yet until now it was largely unknown what such and other political measures would really change in the distribution of wealth. The wealth simulator we have developed to test the most important measures makes it possible to estimate this better.

The model results make it possible to objectify the debate. It shows, for example, that although a wealth tax would generate additional revenue, a tax rate of one or two percent, as is usually proposed, would hardly change anything in the wealth situation in the long run. According to the simulation, the effects would be much greater if young people in Germany were given a starting capital of 10,000 euros or more - or if each and every German received an annual state dividend. At the same time, such measures would be significantly more expensive for the state. The simulations thus help to better estimate costs and benefits. In the end, the choice of the means depends only on political considerations.