ADELAIDE, Australia — Seniors are getting a new incentive to spend big during their retirement. Normally, it’s been an age-old custom for parents, grandparents, and other aging relatives to pass down their remaining wealth to their kids when they die. However, at least in Australia, a new study finds older adults are looking to spend every last dollar before they go. Even more surprising, many younger adults say they’re fine not receiving an inheritance.
Researchers at the University of South Australia say their findings show a changing mindset among younger generations; with many believing no one owes them anything – even their families. Study authors also argue it gives lawmakers incentive to reconsider policies regarding inheritance and estate taxes.
In Australia, lawmakers abolished taxes on money that a family member passes on to their relatives 40 years ago. In that country, an inheritance is the only major form of income that is still tax-free. However, with more young adults saying that their parents should live it up in retirement, researchers say why not bring the inheritance tax back for the fewer cases of passing down wealth?
“There’s nothing more certain than death and taxes. But while people generally assume the combination is notoriously unpopular, our research suggests otherwise,” says Dr. Veronica Coram from UniSA’s Australian Alliance for Social Enterprise in a university release.
Would taxing inheritances help solve income inequality?
The study author’s survey finds two-thirds of young adults and seniors think the Australian government should reintroduce an estate tax on anything over $3 million. Only one in 10 say they’re completely against that.
“The lack of interest in giving or receiving inheritances meant that most participants saw no reason to object to estates being taxed, which opens potential opportunities for much-needed tax reform,” Dr. Coram adds. “Inheritances generally go to people who are already well-off and don’t need them; they encourage inequality and inhibit social mobility.”
“The Australian government needs to find ways to raise revenue to support increased spending demands generated by COVID-19, an aging population, pressure on health systems and increasing environmental disasters,” the researcher continues. “Reintroducing inheritance or estate taxation is a way of increasing government revenue, while reducing a key driver of inequality at the same time.”
Social norms changing around the world?
Researchers say lawmakers are usually hesitant to introduce new taxes because of their unpopularity among the public, who see their incomes shrinking as a result. However, they argue their findings reveal a change in society among nations in the Organization for Economic Co-operation and Development (OECD) – which includes the United States.
“Historically, inheritance taxes have been considered ‘political suicide’. But perhaps their time has come, ironically due to a growing individualism and associated decline in the assumption that family members should provide for one another,” Dr. Coram concludes.
“More research on changing views towards redistributive policy is required, but the results of our study suggest that if governments are considering tax reform, they should not assume that Australians are vehemently opposed to wealth transfer taxation.”
The study appears in the Australian Journal of Political Science.