
Contents
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Introduction Introduction
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Historical development Historical development
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The issue of taxes in the drafting of the Basic Law The issue of taxes in the drafting of the Basic Law
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The finance reforms of 1955 and 1969 The finance reforms of 1955 and 1969
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Basic principles of German fiscal federalism Basic principles of German fiscal federalism
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The five stages of fiscal equalization The five stages of fiscal equalization
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Stage one: vertical distribution of separate and joint tax revenues Stage one: vertical distribution of separate and joint tax revenues
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Stage two: horizontal distribution of joint tax revenues Stage two: horizontal distribution of joint tax revenues
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Stage three: horizontal distribution based on tax capacity Stage three: horizontal distribution based on tax capacity
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Stage four: horizontal fiscal equalization among the Länder Stage four: horizontal fiscal equalization among the Länder
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Stage five: federal supplementary grants Stage five: federal supplementary grants
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Unification and the Solidarity Pact of 1993 Unification and the Solidarity Pact of 1993
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Other federal grants to the Länder Other federal grants to the Länder
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Fiscal equalization within the Länder Fiscal equalization within the Länder
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Current pressures for reform Current pressures for reform
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The issue of Länder consolidation The issue of Länder consolidation
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Conclusion Conclusion
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Notes Notes
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Cite
Abstract
According to the official English translation of Article 20, para. 1, of the Basic Law, the Federal Republic of Germany is a ‘democratic and social federal state’. A better translation might be ‘a democratic and federal social welfare state’. ‘Social’ in German usually means socially fair, or just, and generally equal. Therefore, this concept provides a constitutional basis for the German welfare state. How to secure and preserve a highly developed social welfare state with a variety of public services available to all citizens and simultaneously maintain a functioning federal system with autonomous Länder is a question Germans have had to wrestle with since the Basic Law went into effect in 1949. This chapter focuses on the financing of the German federal system and discusses the issue of taxes in the drafting of the Basic Law, the finance reforms of 1955 and 1969, basic principles of German fiscal federalism, fiscal equalisation within the Länder, German unification and the Solidarity Pact of 1993, other federal grants to the Länder and the issue of Länder consolidation.
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