Overview
- Saxony’s Minister-President Michael Kretschmer publicly demanded the Bund fully offset any income-tax revenue shortfalls, saying a reform without that compensation will not win a Bundesrat majority.
- Kretschmer said there have been no substantive talks between the federal government and the Länder about the plan and pressed for immediate engagement on how losses would be covered.
- Income-tax revenue is split roughly 42.5% to the federal government, 42.5% to the states and 15% to municipalities, so cuts would create direct funding gaps for Länder and Kommunen.
- He framed the debate as part of a wider competitiveness push, calling for measures to lower labour-related costs (Lohnnebenkosten) and criticizing recent fiscal choices, including about €500 billion in new borrowing without clear reform results.
- If the Bund refuses full compensation, the Bundesrat’s power to block laws that affect state finances could halt the government’s tax plans and force either new funding arrangements or a scaled-back reform that protects local services.