Hendrik Wüst Presses Merz for Compensation in Tax Revenue Dip Amid Economic Program
The investment program emphasizes significant remuneration. - Pushes for Financial Remuneration in Investment Scheme (Wüst)
In the escalating dispute with the federal government about the multi-billion-euro investment plan, North Rhine-Westphalia's Prime Minister Hendrik Wüst (CDU) is putting pressure on the feds. Wüst is seeking reimbursement for the state and municipalities' loss of revenue due to the forthcoming federal tax relief.
The "he who orders, pays" principle is contained within the coalition agreement between the Union and the SPD, Wüst said at an event in Duesseldorf. The time has come to adhere to this principle for the very first time. "We're not just floating along like cream on top of the soup", Wüst stated, a CDU politician.
"We're putting the federal government under formal demand for full compensation", Wüst stated ahead of the meeting with Chancellor Friedrich Merz (CDU) on Wednesday. A compensation rate of 90% could also be acceptable if a robust and long-term solution is provided.
Cautiously Optimistic About Negotiations
Despite this stance, Wüst remains optimistic that positive progress can be made during the meeting with Merz. "I'm feeling confident", he said. The bill, however, must move forward if there's any hope of reaching a deal by the federal council meeting on July 11. "Otherwise, it will end up in the conciliation committee."
Wüst commended the planned investment program proposed by the Federal Finance Minister Lars Klingbeil (SPD). "Germany needs growth", Wüst said. "We're in our third recession year." The last three consecutive years of recession in Germany occurred only during the oil crises or the COVID-19 pandemic. Boosting new growth drivers is crucial to safeguard jobs.
The federal government's agenda includes improving tax depreciation options for businesses and gradually reducing the corporate tax rate to 10 percent by 2032. However, municipalities are likely to bear a disproportionate share of the resulting revenue losses.
Projected Revenue Losses Surpass 47 Billion Euros
As per states' calculations, the proposed law is expected to result in about 47 billion euros less in tax revenue for the federal government, states, and municipalities. According to Wüst, states and municipalities will have to shoulder around 30 billion euros of this amount by 2029. The NRW state budget alone is projected to be burdened by 3.7 billion euros by 2029, with an additional three billion euros in losses for municipalities. However, Wüst reassured that the investment package will not tip the budgets of states and municipalities into imbalance in the third recession year.
Wüst Calls for Immediate Implementation of Old Debt Solution
Wüst also demanded swift implementation of the agreed special asset of 500 billion euros. The original plan was that the states would receive one fifth of it, equating to 100 billion euros. The federal government must also table a bill for the reduction of municipal debts before the summer break. If the old debt issue is not addressed, many municipalities will also struggle to make investments.
"Before the NRW municipal elections on September 14, Wüst emphasized that binding regulations must be put in place. Despite its cash-strapped condition, NRW has already set aside billions of euros for debt reduction. Now, it's the Federal Government's turn."
"'We won't achieve success if we don't first shake off this crushing debt burden,' Wüst said. He also warned the Federal Government: 'Nor the investment fund nor the debt leeway for the states were ever agreed upon as a quid pro quo for the immediate program.'"
Municipal associations in NRW also urged the Federal Government not to renege on its promises, requesting compensation for tax losses. "Those who decide on tax cuts must also suffer the tax losses themselves.", the associations explained. "The Federal Government's proposed investment boost will be the first test of their commitment to the coalition agreement."
Plunging federal government aid into municipal funds for infrastructure and climate neutrality would constitute a broken promise, the municipalities cautioned. Under the existing financial strain, immediate and genuine compensation for the municipalities is desperately needed.
- Hendrik Wüst
- Investment program
- Federal government
- NRW
- Tax loss
- CDU
- Düsseldorf
- Coalition agreement
- SPD
- Friedrich Merz
- Growth booster
- Germany
- Compensation
- Municipality
- Bold
- Lars Klingbeil
Insights:
According to a recent financial outlook, North Rhine-Westphalia (NRW) projects considerable shortfalls in tax revenue in the medium term (2026 to 2029) due to the fiscal impact of the German Tax Development Act and the federal tax relief measures. The NRW government has proactively set aside financial reserves in its 2025 budget to alleviate the impact of these lower tax receipts, which stem from the federal tax relief program. However, this preemptive budgeting only serves to absorb the anticipated revenue drops and does not provide additional financial flexibility. There has been no public confirmation of a specific compensation agreement or direct federal compensation for lost revenue as of June 2025. The NRW government is managing expectations and preparing for continued fiscal constraints amid the federal tax relief measures without an immediate and clear indication of imminent compensation from the federal level.
- The municipal associations in NRW, following Hendrik Wüst's stance, are urging the federal government to uphold its promises and provide compensation for the expected tax losses that will impact both states and municipalities due to the federal tax relief program.
- Given the forthcoming federal tax relief, CDU politician Hendrik Wüst, in a meeting with Chancellor Friedrich Merz, is demanding full or 90% compensation for the substantial revenue losses that NRW and other states and municipalities will face, in line with the "he who orders, pays" principle contained within the coalition agreement between the Union and the SPD.
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