Commentary: less tax revenue – what the government must do now

Commentary: less tax revenue - what the government must do now

The fact that tax revenues are no longer rising as strongly as they have recently is no reason to panic, as they remain at a high level. And yet the drubbing should make the rough coalition think again. For as fiercely as the union and the SPD have been at odds since the start of their joint government, they are united by a dangerous tendency toward high spending.

The coalition agreement provides for many additional billions for daycare centers, for child construction subsidies, for pensions, for the social labor market and for rural areas. The sense and nonsense of individual measures is debatable, but what is certain is that the financial scope for the coming years has already become tight as a result of all the packages. Not only in terms of spending. It is also becoming increasingly difficult to provide real tax relief for citizens and companies.

Commitments cannot be rolled back

The federal government has made huge commitments for years to come that will not be easily reversed once the economy turns down. A responsible fiscal policy does not mean getting the money to the people as quickly as possible when it's available. But to provide for bad times. Measures such as the child construction subsidy make sense especially when the economy is sluggish. At the moment there is so much building going on anyway that the builders often can't find any craftsmen at all.

If the government wants to require home ownership – why doesn't it just lower the real estate transfer tax??

And when there is almost full employment, it is not necessary to give first priority to reducing the demand for labor. It would be more important to use the full coffers to bring the ailing infrastructure up to scratch, to invest heavily in education and to reduce debts.

Distribution battles loom on the horizon

Demand and consumption can best be kept going if people have more of their income available at the end of the month. But unfortunately, it is already becoming apparent that the steamed tax expectations will lead to fierce distribution battles in the grand coalition.

A government, however, which already stumbles when on really fat years "only" pretty good results, the burgers were hardly trusted to steer them through lean times as well. Which have still followed every high phase.

The background: why there is less tax revenue

With the economic outlook dimmed by increasing signs of uncertainty around the world, the federal government expects government revenues to stop growing as fast as they have been recently. Federal, state and local governments can plan for 6.7 billion euros more in taxes in the coming years, according to figures from the working group on tax estimates. "The trees no longer grow to the sky", federal finance minister scholz said that no major new margins were visible.

Reminder to exercise restraint

And he gave a clear refusal to demands for a rough tax reform or a complete abolition of the solidarity surcharge. He announced that he would put part of the additional tax revenue toward the research requirement. A program for appropriate tax incentives is currently being worked on.

Further parts of the additional income will be used for defense and development cooperation. Union urges scholz to exercise restraint in future german payments to the european union in view of the figures.

The budget policy spokesman for the CDU/CSU parliamentary group, eckhardt rehberg, indirectly accuses scholz of already expecting higher german transfers to brussel. "Germany's eu exports were allowed to be higher in the next few years than those shown in the tax estimate. They will only be fixed at the end of the negotiations on the medium-term financial framework 2021 to 2027", said rehberg. But no provision has been made in the federal government's financial plan for higher eu payments.

Tax breaks for citizens

The "visions of federal finance minister scholz for a european unemployment insurance scheme" are also uncovered. Scholz must now explain "how he intends to finance his expensive european policy ideas on the basis of this tax estimate".

FDP calls for tax breaks for citizens and businesses. Parliamentary group vice-chairman michael theurer told this editorial board: "especially now, when growth forecasts have to be lowered, the relief of citizens and small and medium-sized businesses is urgently needed." The FDP is sticking to its demand for the complete abolition of the solidarity surcharge. Theurer: "unfortunately, the grand coalition is relying on expensive spending packages instead of using the financial leeway to relieve the burden on burghers."

Federal finance minister olaf scholz of the SPD is "not credible when he talks about solid budget management, but at the same time wants to introduce a european unemployment insurance scheme that will cost germany eleven billion euros" will. And when it comes to pensions, theurer continues, "scholz's expensive demands go even further than those of his party colleague, labor minister hubertus heil.".

Entry into the solid exit

Reiner holznagel, president of the taxpayers' association, argues similarly. He told this editorial office: "now a comprehensive relief of the taxpayers is uberfallig. As a first step, the federal government should immediately abolish the sorry soli completely and for everyone." Thanks to rising tax revenues, this can be financed, says the president of the taxpayers' association. He calls for the immediate entry into the soli-exit for all taxpayers still in this legislative term. "The bundestag can implement this without bundesrat approval."

"Using smart investments for the future"

Marcel fratzscher, president of the german institute for economic research (DIW) in berlin, sees "considerable financial leeway to make germany fit for the future" in the coming years as a result of the tax estimate figures for the state. However, according to fratzscher, there are already signs that demographic change will weaken the german economy and also tax revenues. That's why it's all the more important "that the state uses the high tax revenues today for smart investments in the future and not for electoral gifts and clientelism, such as tax cuts for higher-income earners and the wealthy".

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