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Unformatted text preview: exact amount for the transfer because of regional asymmetries in the expenditures and revenues of the federal
government. Official figures concentrate on direct intergovernmental transfers, which total between 140 and 150 DM or one third of West Germany’s
GDP. This figure is, however, understated because federal outlays and tax expenditures are unevenly distributed among regions and highly biased in
favor of the East. Also the participation of Eastern states in the proceeds from VAT on a per capita basis is a concealed equalization method because
it allows them to tap the (higher) tax potentials of the West indirectly.
See, for instance, Kronberger Kreis (2000). 39 Commission on Fiscal Imbalance economist-academics, but also by politicians and lawyers. In particular the concept of subsidiarity—cherished in the
Maastricht-Treaty as protecting the sovereignty of nation states and lower tiers of government against supranational
interference—has become an attractive guiding principle for reorganizing the relationship between the German
federation and its states. In this vein of “competitive federalism” the governments of some states—notably Bavaria—
have begun to question the existing financial constitution asking for less intergovernmental solidarity in exchange for
greater autonomy at the state level—and requesting, in particular, the right to levy some own taxes.
The recent ruling of the Constitutional Court on the Finanzausgleich8 has to be understood before this background. It is
obvious that a Court whose role is to control the validity of norms cannot transgress the framework set by the
constitution, or ask for its outright revision in the spirit of competitive federalism. The arguments of the Court will always
be constrained by the constitutional status quo. However, its verdict has given some support to an in-depth revision of
the general philosophy of the Grundgesetz, and it has spurred farther-reaching discussions of intergovernmental fiscal
relations in Germany. In this context the following points of the Court’s findings may be noteworthy:
9 ♦ The arguments underline “the preservation of the historic individuality” of the states and “a degree of competition among
the individual states as secured by the federal principle” (section 213) as well as the “innovation-fostering function of
political competition among the states, and vis-à-vis the federation” (section 214). This takes up elements of a more
fundamental criticism by competitive federalism theorists. ♦ The verdict requests the legislator not only to revise the existing law on equalization, but insist on a “law on general
standards” (Maßstäbegesetz) which is to specify the constitutional principles as to their content that would reign the
equalization process (section 277). This law would attain almost constitutional rank, and is supposed to be drafted in the
spirit of Rawls’ “veil of ignorance” (section 282)—albeit intricate to realize in practi...
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