"Scan the headlines and you might think that Western economies are on the verge of an 'inheritance explosion'. Popular narratives warn of a looming 'great wealth transfer' as baby boomers pass down trillions, and some commentators fret about a new era of 'inheritocracy' in which an idle rich class dominates by virtue of birthright. The storyline is alarming: booming bequests funnel ever more unearned riches to heirs, widening inequality and sapping economic dynamism."
"For most people, inherited family wealth consists of a parents' home or long-term savings. Occasionally, it is a family enterprise, and when such firms survive not just a few years but several decades, they reflect a form of entrepreneurship that thinks in generations rather than quarters. Recent research on inequality also suggests that inheritance can, in fact, reduce wealth gaps, as bequests tend to matter far more for less wealthy heirs."
"Taxing inheritances may seem like a neat solution to curb inequality, but in practice inheritance taxes have often proven inefficient and inequitable. As a result, many countries that once relied on them have quietly abandoned these taxes in favour of more effective capital income taxes targeting profits, dividends and realised gains, rather than wealth stocks and bequests."
Inheritance values are rising across the Western world, but rising inheritances do not necessarily pose an existential economic threat or a drag on growth. Inherited wealth often consists of a parents' home or long-term savings and sometimes takes the form of multi‑generation family enterprises that embody long-term entrepreneurship. Evidence suggests bequests can reduce wealth gaps because they matter proportionally more for less wealthy heirs. Inheritance taxes have frequently been inefficient and inequitable, prompting many countries to prefer capital income taxes on profits, dividends and realised gains over taxes on wealth stocks and bequests.
Read at Aeon
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