Wealth inequality in interwar Poland

ABSTRACT

In 1923 Poland introduced an extraordinary wealth tax. I have used internal statistics of the Ministry of the Treasury to estimate wealth inequality in interwar Poland. This data source was not previously used by researchers. There are no estimates of wealth inequality in interwar Poland available in the literature. According to my estimates, the top 0.01% of wealth owners controlled 14.8% of total private wealth. The wealth share of the top 1% stood at 37.5%. The top decile owned 60.7% of total private wealth. Wealth inequality varied strongly by region. A comparison of wealth inequality in Poland with wealth inequality in other European countries in the interwar period yields a diverse picture. The wealth share of the top 0.01% was the highest in Europe, the wealth share of the top 1% was in the middle of the European ranking, and the wealth share of the top 10% was almost the lowest in Europe. The small elite of super-rich (0.01%) controlled a higher share of national wealth than their European peers, but the wealth share of the rest of the top decile was relatively low. The unequal development of former partitions may partially explain the very high top wealth shares.

KEYWORDS:

• Inequality
• wealth
• Poland
• interwar period
• wealth tax

Acknowledgements

I am grateful to the editor Alfonso Herranz-Loncán and two anonymous referees for insightful comments. I am also thankful to the participants of the Ninth Meeting of the Society for the Study of Economic Inequality, where the paper was presented and discussed.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1 Trzciński (1935) reviews estimates of the total value of wealth made in the 1920s and early 1930s.

2 In mid-1923 the ruling majority in the Polish Parliament changed, and Wincenty Witos was appointed Prime Minister. Although he proposed Grabski remain as Minister of Treasury, and Grabski initially accepted the offer, he finally resigned in July 1923. In December 1923 he again became the treasury minister (as well as Prime Minister) and remained in office until November 1924. As we shall see, Polish politics in the early 1920s was quite complex and unstable.

3 In Czechoslovakia the top rate of the extraordinary wealth tax implemented after WWI equaled 30%. In Italy it stood at 53.3% in the case of fortunes which increased during war. In Hungary assets were taxed at different rates, ranging from 5% to 20%. The international comparison of tax rates is not easy, because in Poland the tax rate applied to the whole wealth (not only wealth in bracket). Moreover, Polish tax did not aim at the partial confiscation of the top wealth, which was the case in Czechoslovakia (where top brackets were mostly populated by Germans) or Italy (in the case of fortunes accumulated during the war). Poland also introduced a separate tax on war profits.

4 Markowski (1931) discusses the organisation of tax administration in interwar Poland in great detail.

5 Only 9.5% of households paid the wealth tax. To estimate the wealth share of the top 10% we use Pareto interpolation techniques (parameters estimated for the first tax bracket). The difference between the wealth share of the top 9.5% and the wealth share of the top 10% is relatively small (60.0% vs 60.7%).

6 For example, the wealth share of the top 1% would be 37.52% instead of 37.50%, and the wealth share of the top 5% would be 51.70% instead of 51.79%.

7 According to the outcomes of the 1921 census the number of married females was 3% higher than the number of married males. We prefer to use the higher number, but this choice does not have a significant impact on the results – the difference is simply too small.

8 Here, one important caveat should be noted. The Śląsk (Silesia) province of tax administration is composed of areas that before the war were parts of Germany and Austria-Hungary. As most of the province was part of Germany, I assign Śląsk to the former Prussian partition. Nevertheless, technically speaking Silesia was not a part of the partition, because Poland lost this area long before the partition itself.

9 Bukowski et al. (2019) and Koryś and Tymiński (2021) provide estimates of GDP per capita in each partition before WWI and discuss their economic development.

10 Although the extraordinary wealth tax was based on the wealth assessment made in 1923, 1924 is the first year for which we have administrative tabulations of the income tax paid by legal persons.

11 Unfortunately, I cannot use inheritance tax statistics to estimate wealth inequality. In the interwar period, as well as today, it was not the estate (wealth of a deceased person) itself that was taxed, but the income from inheritance. Therefore, statistics report the number of people who received an inheritance of a given value, not the value of the estate. As inheritance is often divided between many recipients, there is no easy way to convert income from inheritance to the value of estates.