"A crisis is not the right time to raise taxes"

When the prime ministers of the federal states meet with Chancellor Olaf Scholz (SPD) on November 2nd, one thing is at stake: money. While a number of measures from the third relief package have already been decided, such as the 300 euro energy price lump sum for pensioners and up to 3000 euros that employers can pay out tax-free, it is still not clear how the costs for this will be distributed between the federal and state governments. Danyal Bayaz, the former member of the Bundestag for the Greens and current state finance minister in the economically strong state of Baden-Württemberg, on the dispute between the federal and state governments.

WORLD: Mr. Bayaz, in North Rhine-Westphalia, in addition to the gas price brake, the federal government also wants relief for heating oil customers, and if it goes to Bavaria, commuters should also be relieved. What does Baden-Württemberg want?

Danyal Bayaz: Recently, I had the impression that countries that were in the election campaign or are heading towards one are stepping up their demands. However, we should not hold out the prospect of anything that the state cannot afford financially. We have to adjust to the fact that we don't just have a few tough weeks or months ahead of us, but one or two tough years. We have to keep making it clear to citizens that the state cannot cushion everything in the long run. There's no point raising false expectations. For us in Baden-Württemberg, it is about legitimate and realistic demands on the federal government.

WORLD: It gives the impression that one or the other prime minister wants to take another relief trophy from the meeting.

Bayaz: It can't be about winners taking trophies home. It's about a fair distribution of the burden and about the 200 billion euros in the economic stabilization fund being paid out promptly so that hospitals, trade, public utilities and the many small and medium-sized companies can benefit from it.

WORLD: The states are demanding that the federal government pay for all relief as far as possible. They have higher tax revenues.

Bayaz: We have to talk about how we can tackle the third relief package together. In addition, we have an issue that has not yet been clarified, namely the financing of the accommodation of refugees. In the eight months since the war broke out, we have taken in 135,000 people in Baden-Württemberg, which is more than in 2015 and 2016. The federal government has let us down so far. We are finally expecting support at the prime ministers' conference.

WORLD: What is the current relationship between the federal and state governments?

Bayaz: Our relationship is difficult. We in the federal states are currently squeezing every million euro amount out of somewhere when we are drawing up our budget, so that we can also shape something politically at all. Then the coalition partners in Berlin will throw a new relief package of 65 billion euros in front of us and expect us to do our part. You have to talk to us beforehand about packages of this magnitude, which is why there is a dispute.

WORLD: This is a dispute that can hardly be conveyed to the citizens and companies who need help now.

Bayaz: I see it the same way. The relationship between the federal and state governments urgently needs to be put on a new footing after the crisis, we need something like a Federalism Commission III. We have to get away from this mixed financing, where you lose track of things and this bazaar mentality breaks out again and again. The countries must be able to levy their own taxes. We need a clear separation of tasks between the federal and state governments, then there will also be less disputes through more personal responsibility.

WORLD: There is a separation of duties. Local public transport or childcare are actually tasks of the federal states. Nevertheless, the federal government always has to inject money.

Bayaz: That's true when it comes to childcare. But federal politics keeps pushing its way into this area. The federal government generously finances projects like the Gute-Kita-Gesetz initially, but then withdraws after two or three years and leaves the federal states alone with the permanent costs. The federal government should interfere less in state responsibilities.

WORLD: But that is also due to the fact that the federal states cannot manage a nationwide uniform public transport ticket on their own.

Bayaz: Management can help, I don't want to contradict that. But even there it was the case that the traffic light coalition partners had agreed on a 9-euro ticket for three months without knowing how it was to be financed in the long term. That's why we demand that the federal government participate permanently in the follow-up ticket and fulfill its responsibility for financing public transport. A cheap ticket makes no sense if we have to cancel trains because of the massive increase in energy costs.

WORLD: Could individual measures still be canceled if no agreement is reached?

Bayaz: People need clarity now, a mediation committee would take a long time. The federal and state governments should avoid this together.

WORLD: There are disagreements within the traffic light government as to whether the cold progression is actually fully compensated. The FDP says unconditionally that the Greens and the SPD are more cautious.

Bayaz: In normal times I wouldn't discuss it at all, but would say that the cold progression will be compensated one-to-one, that's a hidden tax increase that people are entitled to. In these times, however, I ask myself whether full compensation really has the highest priority. It's better than another tank discount, it's better than any sales tax cuts, but it also contradicts the idea of ​​targeted relief for people or companies who are at the bottom of their game.

WORLD: So you are against full compensation for cold progression?

Bayaz: The full compensation of the cold progression will come. Because the 200 billion euros from the defense shield are now available, I would say let it go, we don't have to discuss that much anymore. In any case, I'm preparing for it, even if it requires additional efforts from us.

WORLD: Another issue of conflict is whether the debt brake will be suspended again in 2023?

Bayaz: There is a clear condition in the law in order to be able to suspend the debt brake: the state's financial strength must be significantly impaired. In view of the increasing tax revenue, it is currently still difficult to justify an emergency situation. On the other hand, we are slipping into a recession. I can therefore understand those countries who say that they cannot prepare their budgets in accordance with the constitution because of the federal government's third relief package, which is why they now need a joint determination of an emergency in order to be able to suspend the debt brake. But to say it again: it will be difficult to justify an emergency legally cleanly at this point in time. In the event of a gas shortage and a deeper economic crisis, things will of course look different.

WORLD: Federal Finance Minister Lindner would like to continue to comply with the debt brake in 2023 anyway.

Bayaz: The Federal Minister of Finance wants to comply with the debt brake on paper and has filled a special pot for this purpose. The countries cannot use this trick.

WORLD: Your party colleagues in Berlin not only have more debt, but also higher taxes, for example on wealth. You too?

Bayaz: A crisis is not the right time to raise taxes. Especially not in times when people and companies are suffering from high inflation. So that is not a question that arises now.

WORLD: But later?

Bayaz: We will have to talk about strengthening the revenue side after the crisis. I don't think that we can manage compliance with the debt brake, the relief measures and the necessary investments in Germany and categorically rule out any tax increases in the long run. Or you have to say clearly what you don't want to spend any more money on in the future. I lack honesty in this debate.

WORLD: Saving is known to be difficult for politicians. Is that why you are also advocating a levy on wealth?

Bayaz: As you know, I don't think much of a wealth tax. One could think about a kind of burden sharing that doesn't touch the substance and stretches over many years. I had already introduced the idea of ​​a crisis solis. When we have this crisis behind us and can honestly take stock, we have to evaluate it in detail. It would not be fair for us to simply burden future generations with the costs of the pandemic, the Bundeswehr special fund and the energy crisis.

WORLD: How about the state, before collecting more billions from its citizens, first see how sensibly it deals with money? Can you say, for example, whether the many corona billions were necessary?

Bayaz: The pandemic was an exception. When public life was restricted, the state had to react quickly and support the self-employed and companies. I have my doubts as to whether the very expensive reduction in sales tax would have been necessary. I see the tank discount from last summer as a clear economic sin, in which billions were spent with the watering can in a socially completely unbalanced manner.

WORLD: Such measures are still decided again and again.

BAYAZ: That's right. Part of the problem remains that we lack the data to take smarter, more targeted action. That's also the crux of the gas price brake: We don't know how many people live together in how many square meters with what household income. The energy companies don't have the data, the state doesn't have the data. That's why we quickly reach our limits when it comes to providing targeted assistance. We urgently need to improve here. Citizens benefit from this and it also becomes cheaper for the state.

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