Federal States Oppose Proposed Tax Cuts for Commuter Allowance and Hospitality Industry
Nations rally against proposed tax reductions featuring black and red denominations
Amidst mounting opposition, the federal government's proposed increase in the commuter allowance and reduction in VAT for the catering industry (Gastro-VAT) face significant resistance from the federal states. A survey by the "Süddeutsche Zeitung" has revealed widespread dissent within the Bundesrat against both initiatives.
The states are concerned that they will shoulder a substantial portion of the financial losses resulting from these tax cuts. They demand that the federal government alone bears the costs, arguing that "who orders, must also pay."
Saxon CDU finance minister Christian Piwarz told the "SZ" that the federal government's practice of adopting federal laws causing lower revenues or higher expenditures for the states and municipalities should cease. His Berlin colleague, Stefan Evers of the CDU, echoed this sentiment, citing an "extremely tense budget situation."
Criticism has extended to the ranks of the SPD. Hamburg's finance senator Andreas Dressel insists that federal-level reliefs must be "financed solidly and really help to boost the economy." He views the increase in the commuter allowance as a "real wrong incentive," and the VAT reduction for the catering industry as having no priority.
The financial ministry in Mecklenburg-Western Pomerania has pledged to consider the voting behavior based on whether the federal government is willing to offset revenue losses through fair distribution of burdens.
Politicians from the Greens and BSW have expressed more explicit concerns, particularly regarding the potential for budgetary manipulations with billions in assets. While the Greens' Baden-Württemberg finance minister, Danyal Bayaz, supports the planned investment booster, he warns against serving individual interests over collective ones, as exemplified by the commuter allowance and Gastro-VAT.
Thuringia's Katja Wolf from the BSW acknowledges the federal government's interest in relieving the country's residents but maintains that these "gifts" should be paid for by those who propose them. The estimated total loss of revenue for both measures over the legislative period is around 23 billion euros, of which approximately 12.5 billion euros would fall to the states and municipalities.
Despite provisions in the coalition contract stating that the federal government would cover costs when laws impact finances at the state level, it remains unclear if this applies to the proposed tax reliefs. The federal government cites an opposing agreement with state ministers in its defense.
While the exact stance of the federal states on these specific tax cuts is not explicitly detailed in recent federal-state budgetary communications, their historic and ongoing debates provide insight. There is a longstanding principle among German states that tax cuts at the federal level should not result in additional burdens or revenue losses for the states or municipalities unless the federal government compensates them.
In the broader context of the economic downturn and tax breaks, the total tax revenues are forecasted to decline by €81.2 billion for 2025–2029 compared to earlier expectations. This context fuels discussions over who should bear the costs for further tax cuts.
- The federal states are opposing the proposed tax cuts for the commuter allowance and hospitality industry due to concerns about shoulderings significant financial losses and demanding the federal government alone bears these costs, as expressed by Christian Piwarz, Stefan Evers, and Katja Wolf.
- The ongoing debates among German states highlight a longstanding principle wherein tax cuts at the federal level should not result in additional burdens or revenue losses for the states or municipalities unless the federal government compensates them, making the question of who should bear the costs for further tax cuts a topic of discussion in the context of the economic downturn and tax breaks.
