Lower Saxony is threatened with a tax hole: 1.3 billion euros lost by 2029!

Lower Saxony is threatened with a tax hole: 1.3 billion euros lost by 2029!

Lower Saxony is facing a challenge: the state expects a decline in tax revenues of up to 1.3 billion euros by 2029 compared to previous forecasts. Finance Minister Gerald Heere (Greens) reiterates that he is not surprised by this development. The country's economy is in its third year without significant growth, which requires significant action. The minister calls for rapid growth impulses and emphasizes the need for reliable tax revenues to fulfill state tasks in order to overcome the financial challenges. NDR reports that the state government is expecting 100 million euros more in tax revenue this year, but this will not be enough to close the tax gap in the coming years.

The situation is made even worse by the federal government's planned special funds of up to 1.4 billion euros annually, which are not expected until 2026 at the earliest. Ulf Thiele (CDU) calls for real relief and accelerated planning, awarding and realization of investments in order to improve the economic conditions. Philipp Raulfs (SPD) supports the state government's cautious planning, but warns that projects must be carefully considered.

Warnings and demands from the economy

The German Federation of Trade Unions (DGB) warns of a “shock-freeze of savings and cuts” that threatens despite the limited financial possibilities. Jan Vermöhlen from the Taxpayers' Association calls for greater relief for indebted municipalities and a reduction in the size of the administrative and ministerial apparatus. This could provide positive impulses to ensure the municipal ability to act. n-tv reports that all county budgets are expected to be in the red again by 2025, underscoring the urgent need to find sustainable solutions.

The red-green state government is therefore planning a budget meeting at the end of June to develop strategies that will counteract future cuts. Despite the tight budget situation, there will be a surplus of almost 680 million euros in 2023, of which 100 million euros will be distributed to the municipalities. They will also receive 640 million euros from a budget surplus for 2024, and they can decide for themselves how to use these funds.

Outlook and challenges

The challenges for Lower Saxony are considerable. Given the average value of 212,000 euros inherited last year and the resulting tax revenue of 658 million euros, the state government must find creative and responsible solutions. It will be important not to cut benefits for citizens for the time being while the tax model is revised to meet the financial burdens of the future.