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Unformatted text preview: ce. ♦ In this vein of thought, the Court has even expressed its unwillingness to tolerate legislation that, in practice, conveys
equalization to the sole responsibility of the Bundesrat (section 284). A simple parliamentary majority would not justify
equalization at the expense of a minority of states—even though their governments may have actively and positively been
involved. It conveys a responsible, balancing, and neutrally appraising role to the federal government, a duty confined by
elementary, general, and overarching legal principles.10 The conflict on equalization, and hence the degree of interregional solidarity, as opposed to greater freedom to act of
lower tiers of government, and hence subsidiarity, is illustrative for the fundamental issues that are at stake in Germany
at the beginning of a new millennium. If ever the German federation and its public sector is to become more lively, more
active and entrepreneurial, more creative and inventive at lower tiers of government, it is time to redesign not only
equalization in the light of the Court’s ruling, but also to tackle more fundamental issues that go beyond the constitution,
and bring stronger competitive elements to bear in the German federation. 3. THE ASYMMETRY OF SOLIDARITY It is consistent with the corporatist nature of German fiscal federal arrangements that taxes are not only uniform
throughout the nation but, what's more, that their proceed are jointly appropriated. This is true for all major taxes with
about 75 percent of total revenue (including the main municipal tax, the Gewerbesteuer). Revenue from exclusive state
taxes is only 4.4 percent of the total. This leads not only to a jumble of political responsibilities; it also tapers financial
autonomy through the packaging of tax policy and a mix-up of joint financing schemes. These limitations at the fiscal
edge are now widely considered to narrow state sovereignties in particular. The provisions that reign equalization among
the states solidify the ambiguity of German intergovernmental fiscal arrangements. They further blur political
accountability and restrain the principle of subsidiarity.
Intergovernmental solidarity has two dimensions: First there is the need to share resources between layers of
government (vertical equalization); second, there is the need to apportion the states’ share among various state
jurisdictions (horizontal equalization). It is useful to epitomize the horizontal equalization mechanism in three stages:
9 10 40 First, there is the distribution of joint taxes, in particular of VAT, among states which exhibit implicit regional equalization
effects; BVerfG, 2 BvF 2/98 of November 11, 1999, Nos. 1 – 347; http://www.bverfg.de/.
This and the following citations of the Court are own translations.
This is in sharp contrast to the de facto behavior of the federal government which used pork-barreling to buy votes in the Bundesrat in favor of a
proposed tax reform recently. The concessions even included the guarantee of specific benef...
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