North Rhine-Westphalia loses 11 euros per capita in fiscal equalization

A study by the Institute of the German Economy (IW) reveals the impact of the federal fiscal equalization system and other federal allocations on German states. North Rhine-Westphalia (NRW) occupies a middle ground, losing approximately eleven euros per citizen due to redistribution measures.

The report highlights significant disparities among other states. Bavaria is identified as the only state that contributes more than it receives, even after accounting for federal subsidies; without redistribution, Bavaria would have nearly 1,200 euros more per inhabitant. Conversely, Bremen benefits significantly, with an estimated 2,800 euros more per inhabitant compared to a scenario without tax redistribution.

The fiscal equalization mechanism redistributes funds between financially strong and weak states, representing a substantial portion of the budgets for many regional and local municipalities.