India's growing economic inequality has reignited debates on wealth and inheritance taxes, with Zerodha founder Nithin Kamath making a bold case for taxing inherited wealth.
“I think inheritance tax is necessary in this country,” Kamat said on a podcast by Jivraj Singh Sachar, saying it's unfair to accumulate wealth over generations without any redistribution.
“Every time a generation gets x amount of wealth, they have to pay some tax on it. That's fair.” While he admits that implementing such measures in India could be challenging, he believes the country will eventually need to take this path.
Kamath's comments align with French economist Thomas Piketty's recent proposal for targeted wealth and inheritance taxes to address India's widening inequality. Piketty proposed a 2% annual wealth tax on assets exceeding Rs 100 million and a 33% inheritance tax on properties of equal value, saying it could raise India's revenue by 2.73% of GDP annually.
However, Kamath tempered his stance by emphasizing the responsibilities of the rich.
“I say to all the rich: you have to do more to give it away,” he says, emphasizing the moral dimension of wealth redistribution.
Former Reserve Bank of India governor Raghuram Rajan's opposition to wealth tax is caught in the middle of the conversation. Arguing that wealth taxes often fail to generate meaningful income and punish success, Rajan called Piketty's recommendations the “pie in the skunk economics.” “The rich always have a way around it,” Rajan said, suggesting India focus on fostering entrepreneurial innovation and optimizing resource allocation.
Kamath also reflected on the challenges of building large-scale businesses in today's hyper-competitive capitalism. “It's impossible to build another Zerodha starting today,” he said, pointing to the pressure on startups to overpromise growth to secure funding. Instead, he urged entrepreneurs to under-promise and over-deliver, creating sustainable growth.