100 billion euros less tax income than expected
The consequences of the pandemic are leading to huge shortfalls in government revenues. “Thanks to the good budget policy of the past few years, the corona crisis can be overcome financially,” says the Federal Minister of Finance.
Dhe consequences of the coronavirus pandemic are leading to huge shortfalls in government revenues. Due to the likely worst recession in the post-war period, tax revenues will be a total of 98.6 billion euros lower than expected in autumn 2019, according to the new tax estimate that has now been published.
The federal government accounts for 44 billion euros in shortfalls, the states 35 billion and the municipalities 15.6 billion. “Despite the shortfall in income and all the uncertainties, it is clear: Thanks to the good budget policy of recent years, the corona crisis can be overcome financially,” said Federal Finance Minister Olaf Scholz (SPD). The next step is to get the economy going again with targeted measures.
The situation looks even more dramatic for the entire period from 2020 to 2024. Here, compared to the autumn estimate, the state as a whole is missing 315.9 billion euros, of which around 171 billion euros come from the federal government. With the tax estimate twice a year, the experts from the federal government, the federal states and municipalities as well as from the Bundesbank and research institutes lay the foundation for the financial planning of the public sector.
“We got the bazooka out”
In the course of the new tax estimate, Finance Minister Scholz announced a rapid economic stimulus program to help the economy over this crisis. “At the beginning of June we want to adopt a comprehensive package of measures in the government – an economic stimulus package that should bring new momentum and new growth.”
High investments in a modern and climate-friendly future should remain the guideline. “We took out the bazooka to stabilize the economy and social life,” said Scholz, referring to the government aid programs that have been decided so far. With the end of the restrictions and the easing that has been initiated, the right time has now come for such an economic stimulus program.
Lars Feld and Marcel Fratzscher react unusually unanimously to the new tax estimate. The two economists warn against attempts to make up for the missing income with spending cuts or tax increases. “The state should not save after the crisis, but now set expansionary fiscal policy impulses,” said the chairman of the FAZ’s Economic Advisory Council. Consolidation should only start when the corona pandemic is over and the economy is growing robustly again. “I don’t expect it until 2022,” reported Feld.
His colleague from the German Institute for Economic Research (DIW) stated coolly that national debt rose this year more strongly than it has since the global financial crisis. “Even if it sounds paradoxical: Only through government spending can the economic damage to companies and employees be limited and a restart of the economy guaranteed,” said DIW President Fratzscher of the FAZ
Even after the financial crisis, the German state reduced its debts solely through strong economic growth and created many new jobs without raising taxes.