Wealth inequality and intergenerational mobility in Russia: possibilities of tax regulation

Abstract

The economic inequality of people in Russia today is high. The decline in intergenerational mobility is determined by increasing concentration of capital. The purpose of the study is to examine the capabilities of taxes in smoothing the wealth inequality of Russians and strengthening the intergenerational mobility in the framework of assessing their relationship on the basis of the World Bank database. According to the results of the analysis, there was a decrease in the mobility between generations in Russia and emergence of the problem of consolidating the economic situation within family, which, if the present trends continue, will be intensifying. For generations born in the 1970s and 1980s, there was recorded a sharp increase in the relative indicator of immobility — the correlation coefficient between the duration of education of children and their parents, from 0.32 to 0.48. There is observed a decrease in the absolute indicators of mobility between generations — a decrease in the share of children who got a longer or higher education than their parents. The Great Gatsby Curve has been transformed in the coordinates of the concentration coefficient of net personal wealth and relative intergenerational mobility in education. Russia’s position on the Great Gatsby Curve indicates aggravation of two related problems — consolidation of inequality and reduction of mobility between generations. To level the economic inequality in Russia, it is necessary to increase vertical mobility between generations. One of the traditional and effective ways of the state regulation of the polarization of personal assets and property of citizens is tax regulation. Today in Russia, property taxes do not help to smooth out the inequality. Personal income tax on donations and property taxes of citizens make in total about 1% of the tax revenues of the consolidated budget. Concentration of wealth in 10% of the most affluent Russians exceeded 74% in 2021. Progressive taxation of personal property, increased rates for owners of many real estate objects, ««luxury tax», inheritance and gift tax, as well as capital taxation have prospects from the standpoint of smoothing wealth inequality and activating intergenerational mobility in Russia.