Lawsuit against the German Länder Fiscal Equalisation Scheme (Länderfinanzausgleich): the Right Step Against Unfair Distribution?

Hessen and Bavaria, two of the three donor countries, filed their lawsuit against the Länder fiscal equalisation scheme to Germany’s Constitutional Court. Is this an overdue step in protest at unfair distribution? In the opinion of Volker Bouffier, Minister President of the State of Hessen, the lawsuits is not against the “Länder fiscal equalisation scheme” and nobody lacks solidarity. The lawsuit concerns shortfalls and flaws in the existing fiscal equalisation scheme, which are solely to the disadvantage of the donor countries. Norbert Walter-Borjans, Finance Minister of North Rhine Westphalia, on the other hand, describes the behaviour of the plaintiffs as lacking in solidarity. The federal fiscal equalisation scheme has stood the test of time, even in exceptional circumstances like the period following German reunification. For Rolf Peffekoven, University of Mainz, the resentment of Bavaria and Hessen is understandable. However, any reform should tackle the entire fiscal equalisation system. He believes it to be questionable whether much can be achieved by bringing a case before the German Constitutional Court. Joachim Wieland, Deutsche Universität für Verwaltungswissenschaften Speyer, does not see high payments for top economic performers as unfair, but as a legal regulation that falls short of the constitutional goal of appropriate equalisation. Problems must be politically resolved. Thomas Lenk, Universität Leipzig, highlights that any response regarding appropriate distribution always implies value judgements. The question of which needs should be taken into consideration in a fiscal equalisation system and to what extent can therefore only be answered politically. In the opinion of Nathalie Behnke, Universität Konstanz, the heavily one-sided burdening of a small number of states can hardly be justified. However, the fact that unequally distributed financial and economic potential, as well as welfare costs, should be borne collectively should not fundamentally be called into question. Taking the issue to Karlsruhe may hinder rather than promote wide support for reform.