Saxony’s Minister-President Michael Kretschmer (CDU) insists that the federal government must cover all revenue shortfalls resulting from an income tax relief measure. Kretschmer told the news portal T-Online that “the states cannot bear revenue losses, and neither can the municipalities.” He added that “a tax reform without compensation for these reduced revenues will not achieve a majority in the Federal Council.”
The revenue generated from income tax is currently distributed as follows: 42.5% goes to the federal government, 42.5% goes to the states, and 15% goes to the local communities. Recently, numerous other Minister-Presidents have warned that the financial situations of both the states and the municipalities cannot withstand further deficits.
In addition to the financial concerns, Kretschmer argued that the income tax reform needs to be viewed within the broader context of German competitiveness. He stated that “production in Germany is too expensive,” identifying taxes, levies, and social contributions as the primary factor hindering the country in international competition. He emphasized the need to specifically address “labor auxiliary costs,” arguing that the “overall picture” must be correct alongside the income tax reform.
