Germany’s Federal Government Faces Opposition Over Tax Cuts and Commuter Allowance
The German federal government’s plans to increase the commuter allowance and reduce the value-added tax for the hospitality industry are expected to come at a significant cost. A survey by the Süddeutsche Zeitung among all 16 federal states has revealed significant resistance to both proposals in the Bundesrat, the upper house of the German parliament.
The opposition stems from the fact that states and municipalities would bear a substantial portion of the revenue losses resulting from the two measures. They are demanding that the federal government cover the costs alone.
According to the survey, the total revenue losses from the two measures, calculated over the current legislative period, would amount to approximately 23 billion euros. Of this, around 12.5 billion euros would fall on the states and municipalities.
While the Union and SPD parties in the coalition government have committed to covering the costs if the federal government passes laws that shift the financial burden to another state level, the question of whether this also applies to the planned tax cuts is disputed. The federal government cites a contrary agreement with the state premiers.
Saxon Finance Minister Christian Piwarz, a member of the CDU, told the SZ, “It’s high time to stop the federal government passing laws or measures that lead to revenue losses or increased expenses for the states and municipalities. Who orders, must also pay.” His Berlin counterpart, Stefan Evers, a CDU member, stated that his state was in an “extremely strained budget situation” and therefore could not agree to measures that would further reduce its revenue.
Criticism is also coming from within the SPD. “Relief measures at the federal level must be solidly financed and actually help to boost the economy” said Hamburg’s Finance Senator, Andreas Dressel. He views the increase in the commuter allowance as a “real incentive trap” and does not consider the value-added tax reduction for the hospitality industry a priority.
The Mecklenburg-Vorpommern Finance Ministry, led by the SPD, stated that the federal government’s willingness to offset revenue losses in a fair distribution of the burden would be decisive in determining its voting behavior.
Green and BSW politicians have been even more explicit in their criticism. Baden-Württemberg’s Finance Minister, Danyal Bayaz, a member of the Greens, welcomed the planned “investment booster” a tax relief for investments in machinery, although this would already cost his state “three-figure million” in the next year. “It is not sensible to serve individual interests, as is the case with the commuter allowance or the value-added tax reduction for the hospitality industry” Bayaz said. His Thuringian counterpart, Katja Wolf, a member of the BSW, stated, “It is understandable that the federal government has an interest in alleviating the burden on people in the country. But these gifts must also be paid for by those who design them.