Growth spurt through federal-state compromise: millions for East Germany!

Growth spurt through federal-state compromise: millions for East Germany!

Prime Minister Dr. Dietmar Woidke welcomed the recently reached compromise between the federal and state governments to design a new investment program. This program aims to strengthen the economy and improve local conditions. Woidke emphasizes the urgency of a growth spurt and calls for tax relief. The investment program is also known as a “growth booster” or “investment booster” and is intended to be supported by various tax measures that are to be passed in the Bundestag today, such as cityreport reported.

As part of this program, 100 percent of the municipalities' shortfall in tax revenue is offset by the federal government. This is particularly important since around two thirds of the estimated loss of tax revenue of almost 46 billion euros for the period from 2025 to 2029 affects the states and municipalities. The federal government will fully compensate for the municipalities' shortfall in revenue, while the states can expect partial compensation. This means that states will receive around half of their calculated tax losses, around 8 billion euros, to support overburdened municipalities and infrastructure projects, such as daily news notes.

Important financial measures

The tax relief package for companies includes various measures, including special depreciation for electric vehicles and depreciation on machinery and equipment. From 2028 onwards, the aim is to gradually reduce corporate tax. These measures are part of the plan to relieve the burden on the economy and promote willingness to invest.

In the past, municipalities have recorded a record deficit of 25 billion euros in 2024 and are therefore demanding full compensation for their shortfall in tax revenue. The new compromise provides for the adjustment of the fixed amounts of the municipal sales tax in order to meet these requirements. Furthermore, additional money is promised for the settlement of old debts of overburdened municipalities.

Criticism and perspectives

Despite the agreement reached, there is criticism from the opposition. This warns that the billion-dollar tax cuts will lead to significant budget holes that can only be covered by debt. Uncertainties continue to exist regarding the exact implementation of the compensation for 2025 as well as future steps to ensure causal connectivity.

The vote in the Federal Council is scheduled for July 11th in order to reach an agreement before the summer break. Woidke and other supporters of the compromise hope that the rapid implementation of the programs will send a signal of relief to the economy and at the same time provide the necessary financial resources for countries to make necessary investments in infrastructure and climate protection.