North Rhine-Westphalia’s Finance Minister, Marcus Optendrenk (CDU), has laid out clear conditions that the federal government must meet before the states agree to the planned federal income tax reform. Optendrenk told the “Tagesspiegel” that the federal government would need to fully compensate the states for any tax revenue losses resulting from the changes. He stressed that the NRW state government has exhausted its budget capabilities and has other priorities, stating that rushing to finance a comprehensive new income tax reform is simply unrealistic.
Despite these strict reservations, Optendrenk indicated some willingness toward reform. He argued that certain changes that are constitutionally mandated should be embraced, pointing specifically to adjustments in the basic or child allowance where the minimum subsistence is concerned. He added that the states are unequivocally ready for these specific adjustments. However, if the federal government wishes to pursue more extensive changes, it must cover the costs-not the states or the municipalities.
While acknowledging that the tax package could generate impulses for economic growth, the NRW Finance Minister cautioned that these impulses must also be fiscally sustainable. Optendrenk told the “Tagesspiegel” that the federal government must clearly define what it can afford and truly needs to drive economic growth back into Germany.
Furthermore, he voiced criticism regarding the lack of state involvement, noting that Chancellor Olaf Scholz and SPD head Lars Klingbeil have not yet included the states in their planning processes. The CDU politician insists that the states must be included in the decision-making. He considers the outcome of the upcoming ministerial conference with the Chancellor uncertain. Before any discussion on the tax reform can proceed, the fundamental principle of “who orders pays” must first be clarified, a concept that is supposed to be introduced by the “Schwarz-Rot” coalition agreement.
