Investments instead of cuts: DGB calls for impulses for municipalities!

Investments instead of cuts: DGB calls for impulses for municipalities!

In view of the recently published Tax estimate Stefan Körzell, DGB board member, warned of an impending course of cuts. While tax revenue for the federal, state and local governments amounted to 941.6 billion euros in 2023, bleak prospects are emerging for the coming years. Compared to the May 2024 estimate, tax revenue for 2024 to 2028 is on average 11.6 billion euros lower. This development is largely caused by weak economic growth and disappointing box office receipts until September 2024.

Körzell is demanding targeted growth impulses from the new federal government in order to counteract the tense economic situation. He emphasizes that fewer public contracts could further exacerbate the crisis. The DGB board sees the rapid implementation of the 500 billion special fund as a crucial measure to stimulate investments and ensure long-term stable income.

Investments for the future

The required investments are necessary not only to overcome the crisis, but also to improve the inadequate infrastructure in the municipalities. Körzell explains that financial resources are urgently needed for social housing, schools, daycare centers, swimming pools and modern administrations. The federal government must ensure that money from the special fund reaches the municipalities quickly in order to provide economic stimulus for the local economy.

In addition, as part of the Tax estimate a decline in real gross domestic product (GDP) of 0.2% is expected for 2023. However, a positive development is forecast for 2025 and 2026, with expected growth of 1.1% and 1.6%. The federal government expects that private consumption will support economic dynamism, despite uncertainties in payroll tax revenue and weaker developments in corporate and investment income.

Growth initiative and budget planning

Federal Finance Minister Christian Lindner emphasizes the urgency of economic growth and less bureaucracy in order to counteract the negative impact of sales tax revenue. The growth prospects have already been taken into account in the macroeconomic assumptions, with positive impulses expected for the future. A draft for the Tax Development Act is not included in the current estimate, but provisions have been made in the budget planning.

In summary, the current tax estimates represent a challenge that cannot be ignored. Both Körzell and Lindner emphasize the need for investments and growth impulses in order to mitigate the economic consequences of the crisis. The coming months will have to show whether the federal government can make the necessary change of course to overcome the ongoing challenges.