State revenues collapse by almost 150 billion euros

Berlin, Niigata The budget problems follow Christian Lindner (FDP) to Japan. While the Federal Minister of Finance is meeting in Niigata with his colleagues from the most important industrialized countries (G7), the Working Group on Tax Estimation in Germany has presented a new forecast – and it predicts a significant drop in government revenue.

According to the experts, federal, state and local government revenues will be 148.7 billion euros lower than previously expected over the next five years. For the coming year alone, the tax estimators expect 30.8 billion euros less for the state as a whole. In autumn they had forecast revenues of 993 billion euros for 2024. Now it should only be 962.2 billion euros.

“We all have to face this budgetary reality,” Lindner said at a press conference in Niigata. Despite the G7 meeting, the finance minister personally presented the figures at a press conference in Japan. After all, they also have an impact on the traffic light coalition’s budget dispute, which Lindner will finally have to resolve in the coming weeks.

According to the estimate, the federal government’s tax revenue will amount to 377.3 billion euros in the coming year, which is around 13 billion less than the experts expected in the autumn. However, the number is not quite as dramatic as it first appears.

The reason: A large part of the lower income is due to the tax cuts that the traffic light coalition decided last year. This leads to a loss of revenue of more than 30 billion euros for the Treasury every year.

Lindner had priced in part of the loss of revenue

The tax estimators had not taken this into account last autumn – but Lindner and his budget experts did take it into account in their internal financial planning. So there is a provision in the budget for this loss of income due to the tax relief.

Since the economy is doing a little better at the same time and revenue is increasing, the tax estimate for the federal budget for 2024 even brings a mini-plus of 2.8 billion euros.

However, this sum is so small that it will not help the finance minister to solve the budget dispute. There is “no new financial leeway,” was Lindner’s message from Niigata to the traffic light partners in Berlin.

For the 2024 budget, you will have to agree very strictly on priorities. “We cannot currently realize any more spending requests with the given income.”

>> Read here: Lindner feels in the budget dispute through the IMF confirmed

In the draft budget for 2024, there has been a hole of 14 to 18 billion euros for months. In the meantime, it should even be 20 billion euros, since the high wage agreement for the public sector also affects the federal budget. Lindner therefore regularly calls on his cabinet colleagues to be frugal. But they keep coming back with new spending requests.

Another delay in the budget dispute

So far it is unclear how the budget dispute is to be resolved. Due to the impasse, Lindner refrained from submitting key figures for the budget in March. He has now announced that the cabinet decision previously planned for June 21 will also have to be postponed. The draft budget should now be ready shortly before the summer break at the earliest.

Green housekeeper Sven-Christian Kindler asked the finance minister to present a draft budget for 2024 that could be agreed. “By the summer, a draft budget must be approved in the cabinet and then handed over to parliament,” said Kindler. “As a traffic light, we therefore want to give the Minister of Finance the opportunity to explain his new schedule at the next meeting of the Budget Committee.”

Sharp criticism came from Christian Haase, the Union’s chief housekeeper. “The tax estimate apparently causes a budgetary meltdown in the coalition,” said the CDU politician. The submission of the draft budget will be postponed to Saint Never’s Day. This is “an affront to Parliament and shows inability and unwillingness to solve the problem”. The coalition should go into budget retreat and finally be honest, demands Haase.

In view of the precarious budget situation, the left wing of the SPD is calling in a new tax paper for higher taxes for high earners and the wealthy. However, Lindner and the FDP strictly reject tax increases. Germany has already fallen behind in terms of competitiveness, said Lindner. Tax increases are “counterproductive”.

>> Read here: The big tax dispute – who in Germany is really being attacked by the tax authorities

Lindner pointed out that according to the latest forecast, the state will record tax revenues of more than one trillion euros for the first time in 2025. “Despite this considerable sum, we cannot finance everything that we have planned,” said the finance minister.

Now work is being done on savings lists

The coalition should now also discuss savings. The Parliamentary Left (PL) of the SPD parliamentary group makes some concrete suggestions in their concept. Above all, the SPD-Left wants to get the subsidies. “We want to reduce superfluous, ineffective and environmentally harmful subsidies,” the paper says.

The state could save 15 billion euros a year by abolishing the energy tax exemption on kerosene, the diesel privilege, the company car privilege and the peak equalization in electricity and energy tax. If, as proposed by the Federal Court of Auditors, exemptions from VAT were also eliminated, the state could save 23 billion euros a year.

At the same time, the SPD and the Greens regularly make suggestions as to how the federal government should spend even more money. Basic child security alone, as envisaged by the Greens, costs twelve billion euros a year. The industrial electricity price proposed by Economics Minister Robert Habeck up to 30 billion euros, the planned subsidy for the replacement of old heating systems is now estimated at up to ten billion euros in the next few years.

>> Read here: Habeck wants additional money for the price of industrial electricity – but Lindner refuses

Federal states and municipalities are also vehemently demanding that the federal government provide more relief for refugee costs. If the situation in the federal states and municipalities continues to deteriorate, the federal government will hardly be able to avoid it and will have to transfer billions more to the federal states in late autumn.

Criticism of special debt pots

And then there are the higher interest costs. After the federal government was able to incur debt for free in some cases, it recently had to offer investors a return on ten-year debt securities of 2.3 percent. As a result of this and a number of special effects, interest costs have risen from four to 40 billion euros within two years.

After the European Central Bank (ECB) raised interest rates again last week and is likely to aim for further interest rate hikes, interest rates on new debt are also continuing to rise.

Most recently, the federal government had financed many special expenses for combating the climate crisis, for upgrading the Bundeswehr or for overcoming the energy crisis through special debt pots outside of the regular budget. Germany has recently attracted more and more criticism.

In recent weeks, international organizations such as the OECD, the International Monetary Fund and the EU Commission have unanimously criticized this trickery to overturn the debt brake.

More: Cancellation of every tax increase – FDP opposes CDU plans with party conference resolution.