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The end of 'soli'? Not so fast, hope states

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The end of 'soli'? Not so fast, hope states
Photo: DPA
16:00 CET+01:00
The Green-Red coalition government in North Rhein-Westphalia is urging the federal government not to do away with the solidarity surcharge on income taxes in 2020, and instead funnel more of the money into the books of the western states, it was reported on Monday.

At a meeting in Düsseldorf on Sunday, a group of Social Democrats (SPD) and Green party ministers laid out a proposal to shift the solidarity tax, created to fund repatriation of former East German states, into a tax benefitting all states starting in 2020.

The solidarity surcharge is calculated as 5.5 percent of income tax. It is separate from the Solidarity Pact II, which ends in 2019 and was established to rebuild the public inferior public infrastructure of the former communist states.

The solidarity surcharge, commonly called "soli" by Germans, is a source of funding for all reunification projects. The state will take in an estimated €14.9 billion through the tax in 2014.  

However, Thilo Schaefer, a public finance expert at the Institute for the German Economy (IW) in Cologne, said that the financial discussions are more about states regaining control over their own finances.

"In the NRW, the finance ministry has too many costs - the state has paid out more than it has taken in," Schaefer told The Local on Monday.  

Schaefer said that as it stands, the money is available to any state making an appeal to the federal coffers.   

 

According to insiders at the summit, more meetings are planned to find a way to ensure that the solidarity tax is replaced with something to benefit all German states.

"For taxpayers, nothing will change. It is just a question of where the money will go. This is simply a matter of widening the playing field," Schaefer explained.

Winfried Kretschmann (Greens), minister-president of Baden-Württemberg, said prior to the Düsseldorf meeting that his state would be willing to work with his fellow party members elsewhere to ensure that the proposals to the federal finance ministry are "consistent".

Attendees said that NRW leader Hannelore Kraft (SPD) was impressed that the SPD- and Green-led states were "well on their way" into the discussions of the topic.

The SPD leader of Lower Saxony, Stephan Weil, signalled that allowing all states to access money collected to ease reunification was the "only recognizable viable solution" to both problems of failing infrastructure and finances.

A survey conducted for Focus showed that 78 percent of respondents supported a wider distribution of "Soli" funds.

A meeting of Christian Democratic ministers also showed that their party was interested in broadening the scope of what the funds could be used for.

"In 2019, when the solidarity pact for reconstruction of the east ends, the funds from the surcharge should be earmarked and allocated by priority," NRW state chief of the CDU Armin Laschet told Die Welt.

However, he encouraged the federal finance ministry to keep the tax as a separate cost.

"The people would only consider that a tax increase" otherwise, he warned.

Schaefer says that keeping the tax as something else isn't the silver bullet for state coffers. "The states have a greater chance of financial security if the federal government were to grant them more taxation autonomy."

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