Flat Tax on Inheritance Would Cost Billions: Economic Expert Achim Truger Warns Against Uniform Tax
January 13, 2026 – By Christina Lohner
The proposal of a flat tax on inheritance in Germany is facing strong criticism from several economic experts, including Achim Truger, a member of the Council of Economic Experts (“Wirtschaftsweise”). Truger cautions that adopting a uniform, reduced tax rate on inheritances—often referred to as a "Flat Tax"—would be not only unjust but also immensely costly to public finances.
Discussion Around Inheritance Tax Reform
The inheritance tax system in Germany currently features progressive tax rates that depend on the size of the inheritance and the relationship between the deceased and their heirs. Particularly close relatives pay lower tax rates, while distant heirs face higher rates. Large fortunes—those exceeding 26 million euros—can be taxed up to 30 percent for relatives and even up to 50 percent for others. This system is designed to ensure a degree of tax fairness.
However, the present framework grants significant exemptions for business assets, allowing many wealthy heirs to pay little or no tax on substantial estates. These exemption rules are intended to prevent the forced sale or closure of family businesses due to tax burdens but have been heavily criticized for enabling tax avoidance among the wealthiest. In fact, these exceptions are the largest tax subsidies according to the federal government’s subsidy report, costing the state around 8.8 billion euros annually.
Flat Tax Proposal and Criticism
Clemens Fuest, head of the Ifo Institute, advocates simplifying the inheritance tax by eliminating special rules for business assets and setting a uniform, lower tax rate—potentially around eight percent. Fuest warns that without such changes, investment levels might decline further, exacerbating Germany’s persistent economic malaise.
However, Achim Truger strongly opposes this “Flat Tax” approach. According to Truger, adopting a uniform tax rate would sharply reduce government revenue from inheritance taxes. A study by the German Institute for Economic Research (DIW), commissioned by the Green Party, found that even a ten percent flat tax without exemptions could cut tax revenues by about 4.3 billion euros annually—a reduction of about a third compared to current revenues.
Truger points out that the inheritance tax revenues flow primarily to the German federal states, many of which are already under severe budgetary pressure. This decrease in income would therefore further strain public finances at the state level.
Towards Greater Tax Justice?
Rather than decreasing tax rates, Truger and other critics argue for abolishing exemptions for business assets while maintaining a progressive tax structure. According to DIW projections, removing these privileges could increase tax income from inheritances to around 21 billion euros per year, a significant increase from the current 13 billion euros.
Truger stresses that reform must balance tax justice with the protection of jobs and company continuity. The Social Democratic Party (SPD) proposes maintaining a staggered tax rate system and supporting business succession by offering a five million euro exemption for businesses and allowing payments to be spread over 20 years. Specific tax rates under the SPD plan have yet to be finalized.
Upcoming Constitutional Court Ruling
Both major political parties and a broad range of experts agree on the necessity of reform. The Federal Constitutional Court is expected to issue a verdict this year on the current inheritance tax system, particularly scrutinizing the controversial business asset exemptions. This ruling may compel the federal government to enact changes to ensure constitutional compliance.
The court’s decision is eagerly awaited but not expected in the immediate months ahead, making ongoing political negotiations on inheritance tax reform likely to be protracted and complex.
Summary: A flat tax on inheritance, while proposed to simplify and potentially stimulate investment, risks sharply reducing vital state tax revenues and undermining progressivity in taxation, according to leading economic voices like Achim Truger. A reform that removes business exemptions but sustains a progressive tax scale could improve fairness and bolster public finances.
Source: ntv.de, with dpa