Federal Fiscal Court: Why the solos are constitutional

The highest German financial judges consider the solidarity surcharge to be permissible. But that could change over time, the court said. The plaintiffs will probably file a constitutional complaint.

The Basic Law regulates very precisely which taxes and levies there may be and who benefits from the income from them. The most important taxes are income tax and sales tax. They belong to the federal and state governments jointly. Article 106, paragraph 1, no. 6 of the constitution also provides for the so-called supplementary tax, which the federal government may levy and whose revenue is exclusively due to the federal government. The solidarity surcharge is such a supplementary tax.

However, the federal government is not allowed to levy these “just like that” and thus increase the income tax unilaterally. Rather, the supplementary levy may only exist if and for as long as the prerequisites for it are met. On the one hand, the federal government needs to have a temporary financial requirement. And on the other hand a good reason for this additional demand. It is undisputed that the costs incurred in connection with German unity are such an additional need, and German unity is also indisputably a corresponding reason for the additional need.

Unity as a “generational task”

The judges at the Federal Fiscal Court have now ruled that this also applies to the years 2020 and 2021. The lawsuit was about this period. In 2019, the legislator explained in the “Act on the Reduction of the Solidarity Surcharge” that there is still a financial need related to reunification, including in the area of ​​pension insurance and the labor market.

There is also no mandatory connection between the solidarity surcharge and the Solidarity Pact II, which expired in 2019. A supplementary levy does not have to be limited from the outset and there could also be an additional need for longer periods of time. Unity is a “generational task”.

Surcharge is “still” constitutional

However, the court also makes it clear that such a levy cannot be imposed forever. Because: A permanent financial need must be covered by taxes that are applied over the long term, not by a supplementary tax. It was “still” constitutional, emphasized the President of the Federal Fiscal Court, Hans-Josef Thesling, in the oral verdict.

In other words, the longer you want to keep the soli, the better the legislator has to justify that you still need it but that it won’t become a permanent levy. So far, the legislature has taken this into account and started with the “entry into the exit from the solos”. Since 2021, around 90 percent of taxpayers have been exempt from the solidarity surcharge. Since then, only top earners have paid the levy.

Plaintiffs can lodge a constitutional complaint

The plaintiffs see this new regulation as unconstitutional unequal treatment. The court, on the other hand, sees this as unequal treatment, but there is an objective reason for this, so there is no violation of the constitution here either. In the case of taxes that are geared to the ability of the taxpayer to pay, it is permissible to take social aspects into account. The welfare state principle justifies that the able pay more than the underperforming. So be it here.

With today’s judgment, it can pass on the solidarity surcharge in its current form for the time being. For the federal government, this means that it does not have to forego the annual income of around eleven billion euros.

However, the plaintiffs have already announced that they will now be moving to Karlsruhe themselves. After the judgment of the Federal Fiscal Court, they have the opportunity to file a constitutional complaint with the Federal Constitutional Court. This would then – regardless of today’s judgment – check whether the solos are still compatible with the constitution 33 years after German unity. It is not yet possible to foresee when such a decision can be expected.