Since 2023, the federal government’s net borrowing has once again been limited by the debt brake (Article 115 of the Basic Law)—following suspensions from 2020 to 2022. This will continue in 2024, with a maximum permissible structural net borrowing of 0.35 percent of gross domestic product (GDP). Based on the debt rule, with a GDP of approximately 3,869 billion euros from the previous year—adjusted for financial transactions and cyclical developments—the maximum permissible new borrowing for 2024 is up to 16.6 billion euros. The planned net borrowing between 2024 and 2027 corresponds to the regular borrowing limit.

(table: 14250)

Source: 2024 Budget Proposal and Federal Financial Plan through 2027 (July 5, 2023).

Rise in Federal Debt and Decline in the Relative Level of Public Investment

By 2027, the share of federal debt in federal expenditures could rise further to as much as 9.3 percent of GDP. This level—comparable to the budget for the Ministry of Digital and Transportation—is cause for concern, particularly in light of rising interest rates. Another challenge is the relative share of investment in federal spending. Despite an absolute increase in investment spending, the relative share of investment spending will decline from 2023 to 2027, while consumption spending continues to clearly dominate.

(table: 14253)

Source: Budget Proposals 2015–2023; Budget Proposal 2024 and Federal Financial Plan through 2027. *Estimated figure.

Completely Abolish the Solidarity Surcharge

The Solidarity Surtax (Soli) has become obsolete following the expiration of Solidarity Package II and must be abolished immediately for everyone. We must prevent this once-temporary special tax from turning into a permanent, disguised tax on corporations and the wealthy. Small and medium-sized family-owned businesses, in particular—which provide jobs and stability during economic downturns—are hit particularly hard by this. A supplementary tax such as the Soli, which was intended to serve a specific purpose, must not remain in effect indefinitely and be used for unrelated needs or to fill funding gaps. Despite the Federal Fiscal Court’s view that there is an ongoing financial need due to reunification, the Soli is not suitable for permanently bridging funding gaps. New crisis-related supplementary taxes should not be hidden under the guise of the Solidarity Surcharge.

Abolishing the solidarity surcharge would relieve the economy of a burden of approximately twelve billion euros. Combined with the measures provided for in the Growth Opportunities Act—such as the introduction of the investment premium and the expansion of the research tax credit—this would provide companies undergoing transformation with greater liquidity for the necessary efforts.

Objective: Consistent Prioritization of Spending

Germany does not have a tax revenue problem, as tax revenues are growing steadily and the tax-to-GDP ratio is at its highest level since reunification. Thus, budget cuts at the expense of the economy and indirect tax increases would be counterproductive. Nevertheless, Germany is increasingly falling behind when it comes to companies’ investment and location decisions. Even now, the tax framework in Germany is no longer competitive. Therefore, a consistent prioritization of public spending and the creation of liquidity for businesses through measures such as the abolition of the solidarity surcharge are essential to overcoming the current challenges. The focus should be on strengthening Germany’s position as a business location and creating appropriate tax incentives, particularly with regard to digital transformation, climate protection, and a sustainable, reliable energy supply.

A tax reform package—including an investment bonus—is therefore needed now to create significant tax incentives for businesses. The economy urgently needs investment incentives to support investments in climate protection. In addition, structural measures aimed at simplification and reducing bureaucracy must be implemented.