A euro earned by owning and a euro earned by working get very different tax bills.

A well-paid professional in a European city works and saves diligently, and after a year lands at some increase in savings. In the same year a regular-size flat in that same city appreciates by more than the professional earned. The person holding the flat did nothing in particular. The person working did everything asked of them. Why is there such a gap? Is that in any way reasonable? And if not what could we do about it?

Two disclaimers up front. I am a software engineer, not an economist, not a tax lawyer, and everything below is me thinking out loud with the evidence I could find. I’m trying to understand better what I observe. I use Claude Fable 5.1 and Opus 5 to help me break or support my reasoning.

Out of sight

Access. For some, buying their own home means either a trade off, too small, too far, and so on, or they always chase a moving target missing a few grand to reach a down payment of a reasonable property. When the obstacle to buying a home is the deposit rather than the monthly payment, the decisive variable stops being your income and becomes your family’s balance sheet. In Germany, nearly a quarter of households who own their home inherited it or were given it [1].

Accumulation. What starts as an advantage in one generation ossifies across several. The coming inheritance wave in the US is estimated at $124 trillion through 2048, about half of it from the top 2% of households [2]. This is Piketty’s r > g in the wild: r, the return on capital (rents, dividends, interest, gains), outrunning g, the growth rate of the economy as a whole, which roughly caps how fast wages can rise. When returns on existing assets outrun wage growth, the gap between those who hold and those who earn widens without anyone doing anything wrong [3].

Concentration of the tax base. Accumulation is fueled by the tax structure. Effective tax rates at the very top have fallen since 1980, and much top wealth now accrues in forms out of reach of the income tax. How far this goes is contested. Saez and Zucman put the richest 400 American families at a lower total effective rate in 2018 (23%) than the bottom half of Americans (24.2%). Auten and Splinter allocate untaxed business income differently and the ranking reverses [4]. Where the crossover sits is disputed. But the direction, that the top pays proportionally less than it used to, is disputed much less.

So where does the money go? The rich save a far larger share of each additional euro as there are only so many hats you can put on one head [5]. Mian, Straub and Sufi traced US tax records and found the surge of top-1% saving flowed not into productive investment but into financing middle-class borrowing and government debt. Subsequently, this helped push interest rates down, and lower rates tend to inflate house prices [6]. It is not trivial to know what would happen if the top-1% were taxed as they were in 1980. But a concentration at the top that mostly finances other people’s debt does not seem to be doing much for society.

Meanwhile the state is a human-hour business and faces Baumol’s cost disease: the price of a teacher or a nurse rises just to stand still against productivity elsewhere, because while productivity of a factory worker or a white collar worker may have doubled, a teacher cannot teach twice as many children as twenty years ago [7]. Baumol’s logic implies the state’s share of nominal GDP drifts upward even while delivering exactly the same services, not through waste but because its costs track wages. I want to also emphasize that the drift is uneven as back-office administration can and should digitise and become more efficient and productive with the rest of the public sectors while a teacher in a classroom simply cannot do that and the share of sectors like education and health-care is going to grow. The strain on the welfare state is a question of who pays, not whether we can afford it.

In daylight

Take Germany as an example. A nurse’s overtime is taxed at her marginal rate, typically 30–42%, plus about 21% in social contributions. Investment income, dividends, interest, gains on shares, pays a flat 25% plus surcharge, about 26.4%, however large the sum. A flat held eleven years and sold for half a million more than it cost pays nothing at all, because ten years is the line. Crypto held thirteen months, nothing (for now). And it is not tax avoidance. It is how the law is written. As is, it taxes the tired most and the fortunate least.

Czechia is not much different. Labour carries income tax plus heavy social and health contributions where recent counts put social-insurance contributions and income tax on wages a roughly half of state-budget revenue, while capital is taxed considerably more lightly [8]. When real wages fell by more than a tenth over 2022–23, the budget felt it very concretely.

The flat itself has drifted out of reach in a way you can count in years of your life. Deloitte’s Property Index put a standard new 70 m² flat in Czechia at 13.3 gross annual salaries (2023 data), the worst of the 18 countries covered, against under five in Denmark and Norway. On 2016 data it was 10.9, and in every edition since, Czechia has ranked at or near the bottom [9]. In the 2025 edition Prague needed 15.0 salaries, up from 13.5 a year earlier, behind only Amsterdam (15.4) and Athens (15.3). Measured against the median Prague wage rather than the average, the figure is 18. It also got 1.5 yearly salaries worse in a single year. In the same 2024 a new 70 m² Prague flat gained 1.6-2.2 times what the average Prague employee took home that year, and 2.0-2.6 times what the median employee did, depending on whether you count asking or transaction prices. The worker’s pay was taxed; the owner’s gain, for someone living in the flat, was not. Young people are not imagining it. They are being priced out of the place they grew up in, and the number that would show it gets mentioned in the news in passing with no action in sight.

Now let that run for two generations. The person who owns compounds while asleep. The person who works starts again every morning. Nobody chooses their parents, and a child born to a family with a paid-off flat in Munich and a child born to a family renting in Duisburg will differ, forty years on, by more than a decade of the other’s wages. That is not a judgement on either family. This is arithmetic. And the transfer, when it comes, is lightly taxed and arrives exactly where it decides the next down payment.

Four directions

These are directions, not a programme. Each has real evidence behind it and real problems in front of it, and I try to give both.

Land. The land under a flat is worth what it is worth because of everything around it: the U-Bahn, the school, the neighbours, the city’s whole accumulated effort over generations. The owner made none of that. Yet the gain accrues to them, and when it does, we call it a market outcome. Before the land tax, notice what we tax instead. In Berlin, buying a flat costs more than a tenth of the price on top (11.6) in transfer tax, notary, registry and broker, most of it the 6% Grunderwerbsteuer. On a family flat that is a five-figure sum, thrown out of the window before the first mortgage payment, and it lands hardest on exactly the first-time buyer the policy claims to care about. The Mirrlees Review called transaction taxes on property among the worst-designed taxes in the system, because they punish moving, and moving is what enables a housing stock to be used well [10]. We tax the transaction, which is the useful act, and leave the holding, where the windfall accrues, alone. That is backwards.

A land value tax takes that gain and leaves the building alone [11]. The reason economists across the spectrum like it is unusually simple. Tax a thing and you get less of it: tax labour, less work; tax buildings, fewer buildings. Land is the exception, because its supply is fixed. Tax it and there is exactly as much land as before. No deadweight loss, which is close to unique among taxes. But it gets better still because the incentive inverts. Today a vacant lot in a hot district costs its owner almost nothing to hold on to while it appreciates. A land tax makes it costly to hold off developing the land.

The theory saw practical applications elsewhere. Denmark has run a land tax since the 1920s, and a study exploiting the 2007 municipal reform, which changed rates in different municipalities for reasons unrelated to tax policy, found the tax fully capitalised into house prices [12]. The buyer pays less for the land because they inherit the tax bill. The burden lands on whoever owned it when the tax arrived, and the cost of using land is left undistorted. A later study disputed the magnitude and the effect, arguing holiday-home areas confound it, so the jury is out. Estonia taxes land and not improvements. Pennsylvania has let municipalities split the rate since 1913, and around twenty did. The Mirrlees Review, the most serious modern review of tax design, endorsed it.

There are two honest problems, both can be found in Pennsylvania. Valuing land separately from what stands on it is hard so when assessments lag the tax is incorrect. Pittsburgh taxed land at nearly six times buildings for decades and then abandoned the split rate in 2001 after a botched county reassessment produced bills nobody could defend. Altoona gave up its pure land tax in 2016. The tax also hits the hardest cash-poor owners of valuable plots, the widow in the family house. It is solvable by deferral against the estate but it is also exactly what sinks it politically. I still think it makes building out rational in a way nothing else does. But “the theory is clean” and “the assessor’s office is competent” are different claims, and the second one is where we need to put more effort.

Stop treating your home as a savings account. Japan is the case everyone brings up, and it is worth understanding what actually happened there, because the answer is only partly about tax. Tokyo added housing faster than it filled it for decades: its stock nearly tripled between 1963 and 2013, it still builds around 120,000 homes a year, and for the first two decades of this century prices barely moved while incomes did not fall in that period [20]. That’s an amazing achievement. Three things made that possible. Zoning is national, twelve (thirteen since 2018) use categories set nationally, and building within the category is by right so a local council cannot invent a special rule to block a project, and neighbours have little leverage to stop it. Even an owner-occupied block can be rebuilt as it is enough if four-fifths of owners vote for it. Those who refuse are bought out at market value rather than holding a veto. On the other hand, in Czechia, a single owner who says “no” can freeze a 1955 building forever, even when a taller, modern, and better building would leave every owner, and the city, better off. Buildings in Japan are treated as a depreciating asset. A wooden house is written down to zero for tax and lending purposes within roughly 22 to 30 years. Nobody buys a house expecting the structure to make them rich. And the 1991 crash reset everyone’s expectations. A generation watched land prices fall for well over a decade (till 2005) and stopped believing that for property the only way is up. Japan added a serious and comprehensive inheritance tax on top, though its lenient land valuation makes land a popular way to pass wealth on, but the houses stopped being the family’s savings account and went back to being a place to live.

The caveats matter. Japan’s population is shrinking, which helps, although Korea’s population is shrinking too and Korean housing is not cheap. Frequent earthquake-code updates drive rebuilding, which is not free. And Tokyo is currently in an investment boom, with a weak yen and foreign money pushing new central condominiums past prices young Tokyo salaries can meet, so the picture is less rosy than it was in 2015 [21]. But the core lesson survives inquiry and we can learn from it: affordability comes from abundance and from a culture that does not expect housing to appreciate. Japan treats a house roughly as it treats a washing machine, a durable that wears out, and its national accounts and its citizens agree on that. We treat it as a wealth store but then it should not surprise us that it behaves like one.

Tax rates. Put simply, tax a euro earned by owning no more gently than a euro earned by working, align the rate on capital income with the rate on labour income, end the holding-period exemptions that make patience more lucrative than work.

There are obvious objections and they deserve space. Capital income is already taxed once at the company before it reaches the shareholder, so a flat rate on dividends is not as low as it looks. Part of appreciation of any long-held asset is just inflation, and taxing it at full rates taxes a phantom. The usual answer to the problem is indexation, which adds complexity. High rates on realisation create lock-in, where people hold assets they would otherwise sell. And capital moves when labour cannot so a rate that is fine for a nurse’s overtime may send a portfolio to Luxembourg. None of these is a reason to just sit and do nothing. All of them are reasons the design matters more than the slogan, and I do not have the design ready at hand.

Inheritance. There is no law of physics requiring a fortune to pass intact through four generations of people who did not build it. We permit it because it is how things are, and because the arguments for it (family autonomy, the right to provide for one’s children, the practical difficulty of taxing illiquid businesses) are real even if I find them weaker than their recognition in the law suggests. The international evidence on design is now fairly specific.

Japan shows it can bind: rates up to 55%, modest exemptions, and gifts made before death added back to the estate. One death in ten now triggers the tax, a record [13]. Germany shows how carve-outs made the policy degressive: the business-asset exemption provides 85–100% relief and is available, through a needs test, above €90m, so the largest fortunes are shielded from it while a child inheriting a securities portfolio pays up to 30% and a niece up to 43% [14]. Sweden shows how much global alignment matters. Steep rates on family firms pushed some owners abroad (Kamprad and Rausing are the names everyone cites, though Henrekson and Waldenström tell it with more nuance) while the tax raised little. Consequently, Riksdag abolished the tax unanimously in 2004 [15].

But the politics may be more winnable than it looks based on evidence from the US. In 2001 Congress voted to phase the federal estate tax down to zero for 2010 (it came back the year after and has been shrinking in reach since; today well under one estate in a thousand pays it). The phase-out passed with broad public support at a time when a majority of Americans believed the tax hit the middle class [16]. In a survey experiment researchers simply told respondents how few estates pay it. That alone roughly doubled support for it, and the effect persisted a month later, with the caveat that the sample was online and the outcome was stated support, not a vote [17].

For global coordination, the prospects are weaker than it was not long ago. Over 130 countries agreed on a 15% minimum corporate tax in 2021, and Zucman’s G20 blueprint extends the architecture to a 2% minimum on some 3,000 billionaires currently paying around 0.3% of their wealth. It does not require every country to join in, only a critical mass, with participants collecting the shortfall on holdouts [18]. The trick is borrowed from the corporate minimum. If a billionaire’s home country does not collect the 2%, participating countries can collect the shortfall themselves, and anyone who moves to a holdout keeps being taxed through a strengthened exit tax. Staying out of the party gives that country a little as it leaves more revenue to others. “Critical mass” means enough large economies signing up that this backstop covers most places where billionaires live and invest. Unfortunately, the US has since rejected the corporate minimum, and in January 2026 the other countries agreed to exempt US-headquartered groups from exactly the backstop rule the billionaire blueprint borrows. The mechanism still exists. Whether the critical mass will materialise is an open question.

Simplicity. Complexity is regressive. The rich buy lawyers and accountants to navigate complexity while the poor face the administrative burden alone and end up receiving less as benefits go unclaimed because claiming is a part-time job [19]. A simpler state redistributes better without raising any rate. Of the four directions this is the one I am most sure of. But complexity has an industry behind it, tax advisers, software vendors, and every group whose exemption depends on a special rule. The people who would gain the most from simplicity are dispersed, busy, and have never organised around “fewer forms” yet.

What I am asking for

I can hear the objection, so let me state clearly what I am pointing at. I’m not saying property is theft. I’m not for nationalisation. I’m not simply calling for “let’s tax the rich much more”. But can we please tax everyone somewhat similarly? Looking at the evidence two euros arriving in two pockets currently get taxed very differently. People are well off either through simple inheritance building dynasties or through a combination of grit and luck. At some point being well off starts compounding with a runaway effect. The consequences for equity between people, equity of fair chances for everyone no matter where they were born and to what circumstances are obvious. I’m for more equity and for design that makes better life possible for many and not only select few.

I cannot propose the reforms readily. I do not know enough to ask for them, and I am wary of anyone who is sure. We can start with putting the numbers where the growth figure sits. Median household income beside GDP per head. Top-1% wealth share beside the effective tax rate each band pays. Completions of housing beside assessed need. Land value gains side by side with wages. Then the argument happens in plain daylight, with the tax code’s actual treatment of the nurse, the flat, and the billionaire in front of it. I wager that once people see the two euros side by side, the rates will not stay where they are. I’m asking for a change. Let’s take some steps today.

References

  1. Deutsche Bundesbank (2012). “Das PHF: eine Erhebung zu Vermögen und Finanzen privater Haushalte in Deutschland.” Monatsbericht, Januar 2012 (PHF wave 2010/11). https://www.bundesbank.de/resource/blob/617508/6c086d78076e3aa472e1e3fa46748d57/mL/2012-01-phf-data.pdf
  2. Cerulli (2024): $124tn through 2048; >50% from 2% of households. https://www.cerulli.com/press-releases/cerulli-anticipates-124-trillion-in-wealth-will-transfer-through-2048
  3. Piketty, T. (2014). Capital in the Twenty-First Century.
  4. Saez, E. & Zucman, G. (2019). The Triumph of Injustice (top-400 rate 23% vs 24.2% for the bottom half, 2018). Contested: Auten, G. & Splinter, D. (2024), Journal of Political Economy; Splinter (2025), “Comment on ‘How Much Tax Do Billionaires Pay?’”, https://www.davidsplinter.com/BillionaireTaxRate.pdf ; reply: Piketty, Saez & Zucman (2024), https://eml.berkeley.edu/~saez/PSZ2024.pdf ; see also Balkir, Saez, Yagan & Zucman (2025), NBER.
  5. Dynan, Skinner & Zeldes (2004). JPE 112(2).
  6. Mian, Straub & Sufi. “The Saving Glut of the Rich,” NBER WP 26941, https://www.nber.org/papers/w26941 ; “Indebted Demand,” QJE 136(4). The counterfactual in the text is an inference, not a finding of the papers.
  7. Baumol, W. (2012). The Cost Disease.
  8. Zeman, M. (2025). “Trends in Real Wage Development in the Czech Republic.” IPPS. https://www.politikaspolecnost.cz/wp-content/uploads/2025/06/06_2025_Trends-in-Real-Wage-Development-in-the-Czech-Republic_IPPS_Martin-Zeman.pdf - the 48% figure is the author’s; cross-check against the Ministry of Finance budget outturn.
  9. Series sources: the Deloitte CZ archive https://www.deloitte.com/cz-sk/cs/Industries/real-estate/research/property-index-archive.html, and Forbes CZ (8 Sep 2022) for the 2021-data figure.
  10. Mirrlees Review (IFS, 2011), Tax by Design, ch. 16, on stamp duty / transaction taxes. Berlin acquisition costs: Grunderwerbsteuer 6% (Berlin), notary and Grundbuch 1.5%, broker typically 3.57% per side.
  11. George, H. (1879). Progress and Poverty.
  12. Høj, A. K., Jørgensen, M. R. & Schou, P. (2018). “Land Tax Changes and Full Capitalisation.” Fiscal Studies 39(1). Earlier version: Danish Economic Council WP 2017:1, https://dors.dk/files/media/publikationer/arbejdspapirer/2017/02_arbejdspapir_land_tax.pdf . Contested: Wroblewski and co-authors argue the effects are confounded by vacation-home concentration and diverging pre-trends. Mirrlees Review endorses land value taxation. Pittsburgh’s 2001 repeal followed the Allegheny County reassessment; Altoona repealed its land-only tax in 2016.
  13. National Tax Agency (Japan): Tax Answer No. 4155 “相続税の税率” (rates 10–55%), https://www.nta.go.jp/taxes/shiraberu/taxanswer/sozoku/4155.htm ; Tax Answer No. 4161 “贈与財産の加算と税額控除（暦年課税）” (gifts before death added back); “令和6年分 相続税の申告事績の概要” (Dec 2025): 10.4% of 2024 deaths taxable, https://www.nta.go.jp/information/release/kokuzeicho/2025/sozoku_shinkoku/index.htm
  14. §§13a–13c ErbStG; constitutional review 1 BvR 804/22. https://www.gesetze-im-internet.de/erbstg_1974/
  15. Henrekson, M. & Waldenström, D. (2016). Economic History Review. https://onlinelibrary.wiley.com/doi/10.1111/ehr.12280
  16. Graetz, M. & Shapiro, I. (2005). Death by a Thousand Cuts; EGTRRA 2001 phase-out and 2011 reinstatement; current incidence: ITEP, https://itep.org/federal-estate-tax-historic-lows-2023/
  17. Kuziemko, Norton, Saez & Stantcheva (2015), AER 105(4). Sample: Amazon Mechanical Turk; outcome: stated support.
  18. Zucman, G. (2024). “A blueprint for a coordinated minimum effective taxation standard for ultra-high-net-worth individuals,” report for the Brazilian G20 presidency, 25 June 2024. https://gabriel-zucman.eu/files/report-g20.pdf ; G7 Statement on Global Minimum Tax, 28 June 2025, https://home.treasury.gov/news/press-releases/sb0181 ; OECD/G20 Inclusive Framework, Pillar Two Side-by-Side Package, 5 January 2026, https://www.oecd.org/content/dam/oecd/en/topics/policy-sub-issues/global-minimum-tax/side-by-side-package.pdf ; US Presidential Memorandum on the OECD Global Tax Deal, 20 January 2025.
  19. Herd, P. & Moynihan, D. (2018). Administrative Burden. Russell Sage.
  20. Tokyo housing stock 2.51m (1963) → 7.36m (2013); Harding, R., “Why Tokyo is the land of rising home construction but not prices,” Financial Times, 2016; national zoning under the 1968 City Planning Act (12 use categories), by-right permitting. Depreciation conventions: wooden structures written down over 22 years for tax purposes. https://www.foreignaffairsreview.com/home/the-paradox-of-tokyos-housing ; https://inroadsjournal.ca/how-japan-keeps-housing-available-and-affordable/
  21. On the current Tokyo boom and the weak yen: Inroads (2024), above; Real Estate Economic Institute data on new condominium prices in the 23 wards. Verify the latest figures before publishing.