Stepping up the Pressure: Wüst Demands Compensation for States and Municipalities amid Investment Program Dispute
Pursuing compensation in investment venture - Pushing for Compensation in Investment Scheme: Wüst Advocates for Financial Remuneration in Investment Plan.
In the ongoing battle between the federal government and regional authorities over the multi-billion-euro investment program for the economy, North Rhine-Westphalia's Minister President Hendrik Wüst (CDU) is ramping up the pressure on the federal government. Wüst is advocating for compensation for the financial losses that local governments would incur as a result of the proposed tax reliefs by the federal government.
Wüst referenced the "He who orders, pays" principle, or the "Konnexitaëtsprinzip," which is embedded in the coalition agreement between the Union and the SPD, during a speech in Düsseldorf. He emphasized that it was high time this principle was implemented. "We're not just floating around like butter in a saucepan," Wüst declared.
Looking ahead to the top-level meeting of minister-presidents with Chancellor Friedrich Merz (CDU) on Wednesday, Wüst stated, "We are approaching the federal government with the claim of full compensation." While a 90% compensation could potentially be arranged if there is a reliable and permanent solution, he added.
Expressing Optimism
Despite the tense situation, Wüst expressed optimism that progress would be made at the meeting with Merz. "I'm confident," he said, but cautioned that for an agreement to be reached by the Bundesrat session on July 11, the legislative project must now progress. Otherwise, it could end up in the conciliation committee.
Support for the Investment Program
Wüst supported the planned investment program by Federal Finance Minister Lars Klingbeil (SPD), stating, "Germany needs growth." With the country already entering its third recession year, new growth impetuses are necessary to secure jobs.
The federal government plans to enhance tax depreciation options for companies making investments, followed by a gradual reduction of the corporate tax rate to 10% by 2032. However, Wüst estimated that the municipalities would bear around 70% of the revenue losses incurred by these measures by 2029.
Revenue Losses for States and Municipalities
Calculations from the state circle indicate that the proposed legislation will result in almost 50 billion euros less in tax revenue for the federal government, states, and municipalities by 2029. According to Wüst's statements, the states and municipalities would be responsible for around 30 billion euros of this amount by 2029. Without compensation, the NRW state budget alone would bear a burden of 3.7 billion euros by 2029, and the municipalities would face approximately three billion euros in revenue losses.
Wüst also urged the swift resolution of older debts. He emphasized the need for the states to receive their agreed special assets of 100 billion euros, and he called on the federal government to present a draft bill to reduce municipal debts before the summer break. If the old debt issue is not addressed, many municipalities may not have the means to invest.
In light of the upcoming local elections in North Rhine-Westphalia on September 14, Wüst stressed the significance of binding regulations. Despite its financial hardships, NRW has already allocated billions of euros for debt reduction. Now, it's the federal government's turn.
"It will only work if we first break free from this crushing debt burden," Wüst stated, warning the federal government: "Neither the special fund for investments nor the debt leeway for the states were ever agreed upon as a quid pro quo for supporting the immediate program."
Local Governments Call Out Federal Government
North Rhine-Westphalia's municipal associations also demanded compensation from the federal government for the financial losses caused by tax cuts. "Those who order the tax cuts must also bear the tax losses themselves," the associations explained. "The federal government's planned investment booster will be the first test of how serious it is about the coalition agreement."
The federal government's proposed use of municipal funds from the special asset for infrastructure and climate neutrality to indirectly finance the tax reform would breach their agreement, the municipalities warned. Given their current financial strain, genuine compensation for the municipalities is urgently needed.
- Hendrik Wüst
- Investment Program
- Federal Government
- NRW
- Tax Loss
- CDU
- Düsseldorf
- Coalition Agreement
- SPD
- Friedrich Merz
- Growth Booster
- Germany
- Compensation
- Municipality
- Lars Klingbeil
Enrichment Data:
Insights:
- The federal government has launched a strong fiscal stimulus program aimed at boosting private investment, but it may lead to tax revenue shortages, necessitating compensation for states and municipalities.
- The federal government is contemplating substantial additional borrowing and increasing deficits, while enabling states to stretch their deficit limits in order to finance the growth package.
- Local governments face potential revenue losses, particularly from declining trade tax apportionments, despite an overall increase in tax revenues.
- The federal government provides supplementary grants to help states compensate for revenue shortfalls and to fund public services and investments.
- The EC countries' principle of free movement of workers, freedom to provide services, and freedom to provide services could be significantly impacted if regional authorities, like Hendrik Wüst's government in NRW, face financial hardships due to tax reliefs and revenue losses, as was discussed in the investment program dispute.
- The ongoing investment program debate in Germany, involving figures like Friedrich Merz, Lars Klingbeil, and Hendrik Wüst, draws parallels to the realms of politics, finance, and general news. These matters could have wider implications for local businesses as a lack of compensation for the financial losses during the investment program could restrict their potential growth.
