Investment booster: municipalities are threatened with financial disaster!

Investment booster: municipalities are threatened with financial disaster!

A storm is brewing over the communities in Germany. The action alliance “For the Dignity of Our Cities” sharply criticizes the federal government’s tax plans. These measures could likely cost cities and municipalities a whopping 13.5 billion euros in tax revenue, which would deal another bitter blow to already strained municipal finances. The alliance shows that the coalition's plans with these plans are diametrically opposed to its own promises to improve the financial situation of the cities, as Tixio reports.

Municipalities with high old debts and increasing social spending are particularly affected. According to the federal government, cities that are already operating at their limits are leaning way too far out of the window. Spokespeople for the alliance, which consists of 74 municipalities in eight federal states, including Herten, Dortmund, Duisburg and Essen, warn that it will be an “investment disaster”. They are demanding immediate and consistent help from the federal government to overcome this crisis.

The plans in detail

The new tax “investment booster” from Federal Finance Minister Lars Klingbeil is intended to create additional depreciation options, reduce corporate tax and promote e-mobility and research. However, the shortfall in tax revenue for the municipalities until 2029 remains uncompensated by these regulations, which increases the concerns of the action alliance. According to the Solinger Nachrichten, the coalition is contradicting its own coalition agreement, which stipulates the examination of the compatibility of laws with local authorities.

What is particularly alarming is the fact that municipalities recorded a deficit of 24.8 billion euros in their budgets last year. Financially weak cities are also faced with a mountain of old debts amounting to around 35 billion euros. This creates a feeling of powerlessness among city leaders, who know the problems of municipal finances all too well.

demands on the federal government

The action alliance has formulated clear demands on the federal government. This includes the federal government's involvement in solving the problem of old debts, an in-patient examination of the funding structures and greater support for increasing municipal social spending. A catalog that is intended to ensure that at least 60 percent of the 100 billion euros from the infrastructure special fund directly benefits cities and municipalities.

In addition, the German Association of Cities points out the need for better financial resources from the federal and state governments in order to ensure the cities' ability to act despite restrictive budget regulations. The increasing challenges posed by climate protection and social integration require flexible and reliable funding mechanisms, as can be read on Städtetag.

Overall, it is clear that a real paradigm shift in funding policy is necessary to help municipalities and avert an investment debacle. In the next few weeks, the focus will likely be on the coalition's financial politicians, who will have to act with a sense of proportion and a good hand so that the cities are not crushed under the burden of the tax plans.