Wealth Inequality | Inequality in wealth: Heirs' Republic of the West

Tax-relevant asset transfers almost only occur in the territory of the old Federal Republic of Germany. Photo: dpa/Jens Büttner It's hard to believe: 36 years after the GDR joined the Federal Republic, there are still drastic differences between East and West, especially when it comes to wealth and wages. When it comes to wealth transfers to the next generation, almost everything that is tax-relevant takes place in the West: 95 percent of the total value of taxed, i.e. large inheritances and gifts. In 2025, four times as much was inherited per capita in the West as in East Germany.

Of course, this shouldn't come as a surprise when wages in the East are still a fifth lower than those in the West. The latter is a result of deindustrialization in the 1990s and the small-scale economic structure since then with hardly any collective bargaining agreements. The frustration will certainly not diminish if politicians in their speeches on the “state of German unity” once again blame the faded “SED dictatorship” alone for all the upheavals.

One factor that cements inequality is the taxation of large inheritances and gifts, which is still far too low. As is well known, the inheritance tax and gift tax law provides for a “requirement test”. However, it is not the business assets of small and medium-sized companies that are spared from taxation, but rather those worth more than 26 million euros.

The state's waiver of contributions from the richest to the community, while gigantic amounts of loans are taken out for rearmament, creates long-term inequality - in both East and West. Because average and low-income earners pay much more taxes on their income, just as they do when purchasing via VAT. A high percentage of the tax revenue then goes towards interest payments from the federal government, which will amount to a good 30 billion euros this year and 41 billion euros in 2027. This money is missing for urgently needed investments in the maintenance and expansion of social infrastructure, education and climate protection.

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