BThe German Association of Towns and Municipalities is already looking forward to the vote in the Bundestag. “We welcome the planned aid from the federal government to maintain the communal ability to act in the Corona crisis,” said Deputy Managing Director Uwe Zimmermann. Right now, the municipal ability to act should be secured at a high level, and savings should not be made against the economic crisis.
On Thursday, the members of the Bundestag will vote on rapid financial aid for Germany’s municipalities in the billions. The federal government is to take over half of the municipalities’ trade tax losses this year. In addition, he will in future contribute to a greater extent than before to the costs of accommodation with the basic security, also known as Hartz IV.
The parties in the governing coalition agreed on this at the beginning of June. According to the latest tax estimate, however, the question arises more than ever why the federal government has to spend part of its income on helping the municipalities. The one-off compensation of trade tax income, which is solely about one-off additional expenditure of 6.1 billion euros for the federal government, is controversial.
Actually, the federal states are responsible for funding the municipalities. If you look at the estimates, which are only a few days old, it becomes clear that the states will have more money at their disposal than the federal government in the coming years.
For the first time ever, the 16 federal states will record higher tax revenues than the federal government this year – according to tax estimates, they will earn 30 billion euros more. By 2024, the annual difference between federal and state revenues is even expected to add up to 100 billion euros. It was the other way around until 2019: Most recently, the federal government received five billion euros more than the federal states.
Dennis Rohde, budgetary spokesman for the SPD, defends the support that his party has promoted: “In the midst of the crisis, it has to be about quick solutions and not about tactical financial games in federalism,” he said.
The municipalities’ investment activities in particular must not cease now – the compensation of the trade tax losses is therefore an important part of the package to stabilize the economy. “By assuming additional accommodation costs, we are also making the municipalities more crisis-proof and particularly relieving cities and communities with high unemployment,” said Rohde.
Finance Minister Olaf Scholz (SPD) originally wanted the federal government not only to participate in the trade tax losses, but also to take over half of the old debts of particularly tight municipalities, which would have been around 20 billion euros more. But he was unable to assert himself with the coalition partner.
The result was the compromise that is now being voted on: a one-off 6.1 billion euros for the tax shortfalls, the other half comes from the federal states, around 3.4 billion euros per year for the federal contribution to the costs for accommodation and heating.
In the case of the Union faction, reference is made primarily to the second part of the change in the law. “We are structurally strengthening the municipal finances, because the federal government takes a significantly higher share of the costs of accommodation in the Hartz IV system,” said Eckhardt Rehberg, the top steward of the CDU / CSU parliamentary group.
Rehberg, on the other hand, rejected demands by the Association of Towns and Municipalities that its members must also receive corona-related compensation payments for tax losses from the state in 2021 and 2022. “I reject an outbid competition, which the federal government should continue to do for the municipalities beyond 2020.”
The demands ignored the constitutional order and would fail to recognize the extent of the aid already provided. “According to the Basic Law, the federal states are responsible for municipal finances,” Rehberg reminded everyone involved. North Rhine-Westphalia, Bavaria and Baden-Württemberg are among the greatest beneficiaries of federal support.
The direct aid from the federal government is one of the extraordinary among the many Corona aid packages due to the necessary amendment to the Basic Law. Since the government factions CDU / CSU and SPD cannot change the Basic Law on their own, they have to rely on the votes of the opposition. Both parties made it clear that the FDP and the Greens will agree.
Not every MP will vote in favor with full conviction. If you ask around, various sources point out that the pressure from cities and municipalities on the federal government was very high, and that no one wanted to mess with them a year before the general election. After all, every MP is also an election campaigner on the ground.
At the last moment, a few more sentences were written in the legal text so that the money really gets where it should. For example, the federal states must report both the federal and state funds to the municipalities “by the end of March 2021 at the latest on the transfer that has taken place”.
In addition, the households of the Bundestag dictated the sentence that the compensation payments only serve to “compensate for trade tax income and are not subject to any earmarking by the state”. In addition, the Federal Audit Office is to be commissioned to retrospectively review the distribution of the funds by the states.
The mistrust between the federal government and the federal states has not diminished through many tough negotiations about the distribution of tax revenues. The scarce resources will tend to exacerbate this conflict in the future.