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Studies in Comparative Federalism: West Germany (M-128)

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Studies in Comparative Federalism: West Germany (M-128) AN INFORMATION REPORT Studies In Comparative Federalism: WEST GERMANY COMMISSION ON as INTERGOVERNMENTAL RELATIONS Washington, D.C. 20575 JULY 1081 M-128 Preface In the State and Local Fiscal Assistance powers to the states, although there is a tradi- Amendments of 1976 (P.L. 94-488), Congress tion of strong national government in the coun- asked the Advisory Commission on Intergov- try. The resulting tension has led to interesting ernmental Relations to study and evaluate "the new techniques of intergovernmental action allocation and coordination of taxing and such as the "cooperative federalism" described spending authorities between levels of govern- in the study. ment, including a comparison of other federal Considerable attention is devoted to fiscal government systems." The objective of this re- equalization in West Germany. The disparities search is to determine how federal systems in in economic and fiscal capacity among West other industrialized nations have dealt with German states and local governments are rela- some of the issues of fiscal federalism that are tively minor compared to the situations in the of current concern in the United States. other countries which have been studied, and To carry out this assignment, we have com- West German equalization techniques have missioned studies of federal systems in three been successful in alleviating the impact of highly developed industrialized countries with these disparities. strong national governments: Australia, Cana- The study was finished in February 1978, da, and West Germany. In addition, a compara- and is therefore based on figures and literature tive study of the United States and the three available up to that time. However, there are no countries has been prepared. Individual coun- indications of any important new trends. In try studies were assigned to eminent scholars general, the tendency toward more centraliza- of fiscal affairs; in this case, the author was a tion and the reduction of local fiscal autonomy citizen of the country under study. has increased rather than subsided. This analysis of fiscal federalism in West Germany describes a country whose federal constitution is only 30 years old. The West Abraham D. Beame Germany Federal Constitution grants major Chairman iii The author of this study is Professor H. Zimmermann of the Philipps-Universitat Mar- burg in West Germany. He specializes in the study of West German and comparative federal- ism. John Shannon, assistant director for taxation and finance at the Advisory Commission on Intergovernmental Relations was the general director of the series of studies of comparative federalism. Because there are important varia- tions in the terminology and technical terms used in West Germany and those used in the ACIR's other studies, the staff of the division of taxation and finance edited this study to make it more understandable to the American reader. For those readers familiar with German, the German equivalent phrases for technical terms have been retained in the text. Susannah E. Calkins and L. Richard Gabler edited the manu- script and the tables. Ruthamae Phillips typed the study and the bibliography; Emily Crews typed the tables and prepared the map. Wayne F. Anderson Executive Director John Shannon Assistant Director Taxation and Finance Contents Chapter 1 The Political Framework of West German Fiscal Federal- ism: Federal. State. and Local Levels ..................... An Outline of the Levels of Government ........................ The Division of Functions and Expenditures .................... The Federal Government ................................... The State Level ............................................ Local Functions ........................................... The Vertical Distribution of Revenues .......................... Types of Revenues ......................................... The Vertical Distribution of Taxes .......................... The Tax-Sharing System ................................... 1949 and 1969 as Major Events in the History of Fiscal Federal- ism in West Germany .......................................... The Constitution of 1949 ................................... The Reform of 1969 ........................................ Recent Trends ................................................. Chapter 2 Regional Disparities at the State and ~ocalLevels ........ Regional Disparities ............................................ Economic Disparities .......................................... The State Level ............................................ Economic Disparities Among Local Governments ........... The Economic Disparities and*ational Goals ................... Regions Affected by the Separation of the Germanies ........ Regional Planning Goals ................................... Regional Economic Policy Goals ............................ Aspects of Fiscal Federalism ............................... Policies with Effects on l$onomic Disparities ..; ............ Regional Impacts of Other Policies ......................... Fiscal Disparities .............................................. The State Level ............................................ Fiscal Disparities Among Local Governments ............... vii Chapter 3 Fiscal Equalization ...................................... The System of Fiscal Equalization .............................. Equalization and Personal Income Redistribution ........... "Implicit" Equalization .................................... Equalization of Revenues Among the States ..................... The Concept of Horizontal Equalization Mechanisms ........ Equalization Among the States ............................. Equalization Effects Among the States ...................... Equalization of Revenues Among Local Governments ............ Objectives of a Specific Equalization Mechanism for Local Governments ............................................... The Technique of Equalization Among Local Governments . Equalization Effects Among Local Governments ............. Chapter 4 Economic Stabilization in a Federal System .............. The Importance of the Stabilization Goal in West Germany ...... Institutional Arrangements ..................................... Instruments of Multilevel Stabilization Policies ................. Rules of "Good Conduct" .................................. The Role of the States ...................................... Influencing the Local Level ................................ A Comment on the Effectiveness of Intergovernmental Stabiliza- tion Policies ................................................... Chapter 5 Public Sector Growth .................................... The Public Sector .............................................. The Share of the Three Levels of Government ................... Their Share in Personnel and Expenditures ................. Revenue Structure and Interlevel Dependency .............. The Role of Government-Owned Business Enterprises ........... Problems of Definition ..................................... Assessing the Importance of Government Enterprises ........ Chapter 6 Federal-State:Local Relations: Selected Aspects ........... Diversity Among the States in Fiscal Relations .................. Aspects of Fiscal Diversity ................................. The Size of the Public Sector. by States ..................... Revenue Structure. by States ............................... Intergovernmental Coordination Between the States ............. Interstate Agreements ...................................... Ongoing Interstate Coordination ............................ Fiscal Consequences ....................................... Interlevel Programs in West Germany ........................... Federal-State Programs ..................................... Federal-Local Programs .................................... The Quantitative Importance oc "Cooperative Federalism" ... Tendencies in Vertical Relations ........................... Federal-State Relations ..................................... The Unpredictability of State-Local Relations ............... Selected Bibliography on West German Fiscal Federalism .......... viii Political Subdivisions in West Germany. 1976 .................. Federal. State and Local Expenditures. by Functions. 1974 ...... Major Revenues. by Levels of Government. 1974 ................ Tax Receipts. by Levels of Government. 1978 ................... Tax Sharing in West Germany. 1978 ............................. Economic Indicators for States. 1976 ........................... Economic Indicators for Selected Local Governments ........... Economic Indicators for Regions in Hesse ...................... Fiscal Indicators for States. 1976 ............................... Balance of Federal Government and Social Security Revenues and Expenditures. by States. 1960-70 ................ Fiscal Indicators for Selected Local Governments. 1975 ......... Share of State and Local Governments in Expenditures for Se- lected Functions. by States. 1974 ............................... Consolidation Among Local Governments. 1970 and 1976 ....... Technique of Horizontal Revenue Equalization Among the States. 1976 ......................................................... Effects of Fiscal Equalization Among the States. 1976 ........... Assignment of State Tax Revenue to the Local Grant Fund. by State. 1977 .................................................... Community Size Factors in State-Local Grants System. by States. 1977 .......................................................... Calculation
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