Germany has a system of compensating the tax incomes between the federal states. The "richer" pay for the "poorer" Länder. Especially after re-unification in 1990, the system became more and more unbalanced because all 5 new Länder became receivers. Currently only four (Bavaria, Baden-Württemberg, Hamburg and Hesse) of 16 Länder are donors, with Bavaria paying more than the half (more than 3 bio. Euros) and Berlin receiving more than the half.

Bavaria actually was the only state in German history to go from a receiver to a donor, now paying every year the amount received between 1949 and 1990 combined. Currently Bavaria is preparing a lawsuit at the constitutional court against the current system of compensation.

The fiscal experts of CDU and CSU of all Länder have agreed to reform this system. According to the proposal, Berlin should be given special status as national capital (corresponding to DC in the US, but with full voting rights in both parliamentary chambers). Currently the Länder keep less money when they earn more. CDU and CSU want to lower the current progressive tax system with the result that Länder who raise their income also keep more from this. The experts propose to introduce a real state share in the income tax, so that income tax might be different for different Länder. Similar to the European level, sanctions shall be introduced if some Länder have deficits that are too high. CDU and CSU want less mixed financing policies of federal level and Länder.