Government's federal blueprints - Finance Official Expresses Apprehensions Regarding Proposed Tax Reductions
Green Party's finance minister of Lower Saxony, Gerald Heere, has raised eyebrows over the federal government's proposed tax cuts, as reported in "Nordwest-Zeitung". Although the state budget for 2025 has incorporated these plans, Heere underscores the financial stability of the state overall.
Last month, news broke that Federal Finance Minister Christian Lindner (FDP) intends to mitigate the impacts of high inflation and alleviate taxpayers by €23 billion over the coming years. This involves making incremental adjustments to income tax by 2026 to combat what he calls "cold progression" - a covert tax hike where a salary increase is entirely absorbed by inflation, yet still leads to higher taxes.
According to Heere, Lower Saxony might encounter annual revenue shortfalls of €700 to €800 million from 2026. While this could potentially stimulate the economy and generate additional tax income, Heere warns of a substantial budget deficit that might be hard to swallow. "This substantial amount is tough to swallow," he stated, hinting at pending heated discussions between the states and the federal government.
Despite the financial challenges predicted for Lower Saxony, the state government still intends to contribute to the federal government's tax cuts plan. The Hanover, being the capital of Lower Saxony, will also be impacted by these financial changes.
