To strengthen the local governing authorities, it is important to give the municipalities control over spheres of authority which they can organise and in which they can take independent decisions. In many democratic states, municipalities take on important functions in areas such as infrastructure, education, public transport and health. Municipalities must have the financial means to take on these functions. The more financial power a municipality has, the more autonomy it has. In Germany, there are three main sources of income for municipalities: tax revenue, subsidies from the regional and national government, and fees, charges, and contributions paid by local residents for services provided by the municipality. The following paper explains how these three sources of income are utilised by municipalities in Germany.