Super rich could save the state

“A new analysis by The Economist shows a massive increase in billionaire wealth, not only during the corona pandemic, but steadily since the 1990s. 

In contrast, in the past 200 years, countries have never been as heavily indebted as they are today. There is a lack of money for education, health, an efficient infrastructure, climate protection and many other forward-looking tasks. The political leaders have so far refused to resolve the contradiction between growing deficits in services of general interest and economic efficiency on the one hand and an enormous concentration of wealth on the other. It is high time that politicians do this.

The Economist's research shows that billionaires' share of wealth has exploded over the past 25 years. If all the billionaires in the world owned assets of $315 billion in 1998, which corresponded to one percent of global economic output at the time, their assets will have grown to $3,000 billion by 2022 (three percent of global gross domestic product).

The values in autocratic countries and in economic sectors that are known for corruption have risen particularly sharply: banks, construction, real estate, raw materials. 

But this share has also increased in democracies – from 0.5 percent to 2.5 percent of economic output. So it's quintupled.

Germany hardly taxes wealth and taxes heavily labor

In hardly any other democratic country is the share of the assets of the super-rich in economic output as high as in Germany - it is 13 percent of GDP or almost 500 billion euros. However, it hardly comes from sectors where corruption is often observed - partly because of a strong rule of law, but also because Germany has hardly any raw materials.

Germany, on the other hand, does not fare as well when it comes to the origin of the billions in assets: 70 percent did not come about through the work of one's own hands, but through inheritances and gifts. The argument that wealth was primarily achieved through economic performance is only partially true in democracies and tends to be less and less true. And that proportion is increasing as we find ourselves in a generational shift, with men and women who built much wealth after World War II now passing it on. Every year in Germany up to 400 billion euros are given away or inherited.

A second key reason for the unusually large wealth in Germany is that hardly any other country taxes wealth so low and at the same time taxes labor so heavily.

It shows that billionaires are benefiting from crises and can then increase their assets - above all through the boom in the stock and real estate markets. This was the Corona year 2020 according to analyzes by the Financial Times and J.P. Morgan one of the most financially successful years for female billionaires worldwide: their number increased by 700 to 2,700 in 2020. At the same time, more than 100 million people have slipped into absolute poverty that year, meaning they have to live on less than $1.80 or €1.60 a day. Germany is no exception: the number of billionaires has increased by 29 to 136 in 2020, and their fortunes have grown by 100 billion euros.

DIW study reveals blatant wealth inequality

Huge inheritances, the increase in value of shares and real estate and an unusually low taxation of wealth are the main reasons for the high and increasing inequality of wealth, which in Germany is among the highest in the western world.

A 2020 study by DIW Berlin using SOEP data on the high net worth (including billionaires and millionaires) shows that the richest 1 percent of Germans (1.5 percent of Germans are high net worth) have over 3,600 billion euros, or 35 percent of total private wealth available in Germany. That's a little more than 90 percent of the population combined.

An average millionaire has a net worth of three million. An average adult in the bottom 50 percent of the wealth distribution, on the other hand, only has net wealth of €3,682.

Caution should be exercised when normatively categorizing these numbers: Some high net worth individuals have made valuable contributions during the pandemic - one example being the founders of BioNTech, who have helped save lives with new vaccines, medicines and equipment. But these account for only part of the increase in wealth. So it's not about a debate about envy, but about the question of achievement, efficiency and justice.

The contradiction for politics today is: the national debt has never been higher and at the same time the services of general interest have never been so bad, whether education, health, climate protection, infrastructure - the problem that politicians have to face: Should they continue to reduce public services and should the state live even more removed from its substance? Or does it want to make the necessary public investments and finance them through efficient spending and higher tax revenues?

On average, Germany taxes wealth at one percent of economic output. 

It takes in 40 billion euros a year. If the state taxed wealth as heavily as France, Great Britain or the USA, it would have 120 billion euros in additional income every year. 

A heavier tax burden on assets can definitely be designed in such a way that it is not economically harmful. And it would be enough to finance the necessary public investments and at the same time to put the national budget on a sustainable footing.

Is there any good reason against such a reform in Germany?”

Is there any good reason against such a reform in Lithuania?