Zu Reformoptionen der Gemeindefinanzen

Abstract

Abstract In their paper Thomas Döring and Bernd Hansjürgens refer to the reform discussion of local public finance in Germany. Against the background of rising expenditures and lower revenues a fiscal reform on the local level is absolutely necessary. Such a reform should focus on both the expenditure and the revenue side of the local budget. With respect to expenditures a new division of functions between the upper governmental levels and the local level should be taken into account. With respect to revenues reforms are needed that facilitate communities’ ability to raise revenues from own sources. It becomes apparent that the current political discussion which focuses on the centralisation of the costs of unemployment and on the reform of the local business tax is much too narrow to solve the fiscal crisis on the local level. Johanna Hey argues that the upcoming reform of the municipal finance system gives the chance to overcome the sufficiently well-known problems of the German local trade tax. Although the starting point of the discussion is the deficit of the municipal budgets the author calls for a conceptual framework. The sole goal of raising additional revenue will not lead to a rational tax system. As other taxes local taxes have to be designed in accordance to the ability-to-pay-principle, since it is impossible to define a tax base equivalent to the cost of public goods. The author compares the three recently discussed models. From a systematic and constitutional point of view the abolishment of the trade tax and implementation of a local surcharge to the personal and corporate income tax is the most favourable option for reform. Juergen B. Donges recommends a complete overhaul of local taxation systems according to the principles of pay-as-you-go and of allocative neutrality. Ideally, local public revenues should be mainly based on charges levied directly on users of local public services. But the nature of some public services make taxes a better source of revenues for municipalities. The author suggests three kinds of taxes: First, the already existing real property tax (Grundsteuer) based on an assessment closer to market values. Second, a new local corporation tax (“allgemeine Betriebssteuer”) will be introduced; it would replace the existing trade tax on income (Gewerbesteuer) which is fundamentally deficient. Third, a new local personal income tax (“allgemeine Bürgersteuer”) will be imposed, intended to replace federal income tax transfers for local authorities and local shares of value added tax. In any case, a reform of local taxation should not lead to higher overall taxation. Each local government should freely choose its own levels of taxation, meaning efficiency gains from competition of public services at a local level.