Economic costs of the German traffic light government’s tax package

_ Yuri Kofner, economist, MIWI Institute. Munich, 15 December 2023. First published in the Austrian FREILICH Magazine.

What does a left-wing government do when it wants to stick to its eco-socialist “transformation” of society, but its debt creation and budget tricks have been categorised as unconstitutional by the Constitutional Court? Exactly – it is raising taxes, introducing new ones, fuelling inflation in order to reduce government debt and openly declaring that it will suspend the constitutional debt brake anyway. All in all, the measures introduced by the traffic light government will cost every German household an additional 1,000 euros next year.

The left-wing reorganisation of German society costs money, and a lot of it. Here 50 billion for the Great Exchange (aka asylum spending),[1] there 39 billion for work discouragement and migration incentives (aka citizens’ income)[2] and a further 42 billion or so for the green lobby (aka subsidising so-called “climate-friendly technologies”).[3] That adds up – per year, mind you.

To finance all this, previous left-wing federal governments have introduced new taxes, such as the CO2 levy introduced by the CDU/CSU in 2021.[4] But nobody wanted to increase the tax burden too drastically too quickly so as not to give the AfD too high election results, or even, God forbid, a blue government that would reverse the socialist march towards “climate neutrality”.

So those in power did what they always do – they ran up debts. A lot of it. Net borrowing of 115 billion euros last year (3 per cent of GDP). 215 billion euros a year earlier (6 per cent of GDP). And another 130 billion euros in 2020 (3.8 per cent of GDP).[5] It is actually illegal to incur so much debt – the constitutional debt brake prohibits new borrowing in excess of 0.35 per cent of GDP. Under the pretext of supposed emergencies, first corona, then corona and the war in Ukraine, and with the help of new debt pots (aka special funds) that are managed alongside the core budget, the ruling elite is circumventing this onerous requirement.

Now, the Federal Constitutional Court has rightly declared these budget tricks illegal. To avoid a state crisis, for the time being, the traffic light coalition has decided to do what it actually wanted to avoid and what the FDP said would never happen with it in government – no, of course not to cut spending on mass migration, the socially lazy and green lobbies, but to quickly and drastically increase taxes for the (still) working population.

The bouquet of higher and new taxes has it all: first and foremost, a greater increase in the CO2 tax, a new plastic tax, a paraffin tax on domestic flights, but also an end to reduced diesel and vehicle taxation in agriculture, no budgetary reduction in network charges, the premature end to the energy price brakes, the renewed increase in VAT in the catering sector and on gas, as well as the introduction of the CO2 toll for lorries. Thank you, FDP.


In 2024, the CO2 levy was to rise by a third from 30 to 40 euros per tonne of CO2. Now it is being increased by half to 45 euros per tonne of CO2. Compared to not paying a CO2 tax, the following will become more expensive: a litre of petrol and diesel will increase by 14.1 and 16 cents respectively, heating with heating oil and gas by 14.3 and 1.1 cents per kWh, coal by 3.9 cents per kWh and waste incineration by 19.1 euros per tonne.[6] The additional costs for refuelling, heating and waste collection will cost the average family an extra 82 euros.[7]

The plastic tax has been collected by the EU since 2021. In previous years, the German government refrained from passing it on to producers, preferring instead to simply transfer an annual amount of 1.4 billion euros directly to Brussels. Not any more. Citizens now have to pay 80 cents per tonne of non-recyclable packaging waste. That is an additional 34 euros per household[8].

The impoverishment of the population over several years is also noticeable in domestic air traffic, which is still a third below the pre-corona level. As short-haul flights have always been on the hit list of climate radicals, it is only logical that the state is now levying a paraffin tax on domestic flights, which makes the average flight ticket 12 per cent more expensive. Divided among each household, the additional annual costs amount to 70 euros[9].

German farms are being regulated to death with ever new bureaucratic monsters and eco-regulations. Now the last pillar of domestic agriculture is also falling: tax concessions for agricultural diesel and the motor vehicle tax for tractors are to be abolished. Nominally, this will cost each family an additional 22 euros per year.[10] However, as these costs are incurred at the lower end of the food production chain, inflation in supermarkets and restaurants is likely to rise significantly. German food prices are already a third higher than before the coronavirus crisis.

Due to the expansion of weather-dependent solar and wind energy as well as the shutdown of safe base-load capable nuclear power plants, the costs for grid stabilisation measures have exploded tenfold in the last decade. At an astronomical 45.7 cents per kWh, Germany already has the highest electricity prices in the world.[11] In order to make the madness of the energy transition less noticeable, the state subsidised grid fees until recently. For 2024, 5.5 billion euros were planned for this in the federal budget. No more than that. Now citizens will have to pay at least another 3.3 cents per kWh on their electricity bill. This in turn will cost the average household an additional 133 euros per year[12].

The same applies to the energy price brakes, which will now expire in December 2023 and not in April 2024 as planned. As a result, gas prices will rise by around 2 cents per kWh and electricity prices by a further 5.7 cents per kWh. The additional burden for households will therefore be a whopping 337 euros in 2024.[13]

VAT will also be tripled again from 7 to 19 per cent. 14] More expensive restaurant meals and gas bills for heating will cost the average German family a further 118 euros[15].

Although the new CO2 toll for lorries is not a direct consequence of the budget crisis, it should nevertheless be included in this inglorious list, as it was introduced by the traffic light in December 2023 and will be particularly noticeable next year in that supermarket visits and online purchases will become significantly more expensive due to higher logistics costs: 205 euros per two-person household, to be precise.[16]


Overall, this tax madness will make every German family at least 1,000 euros poorer in 2024. The extent to which this tax offensive will fuel inflation has yet to be assessed. My evidence-based assumption is that the inflation rate will be around 2 per cent higher than it could be instead.

Once again: all these taxes and levies are now to be raised to supposedly plug the 60 billion euro budget gap. So far, so bad. However, the coalition government made it clear that it would almost certainly lift the debt brake again in 2024 anyway – “in the event of an escalation of the situation in the Ukraine war”, which is certain if you follow the latest news about Western war-weariness and Russian successes on the Donbass front. Berlin has promised not only to continue supporting Ukraine (in addition to the 70 billion euros already provided),[17] but also to step in if other NATO partners default on payments. No problem, the German citizens have not yet been completely squeezed dry. It’s a pure, pardon the pun, joke.

All in all, it is already safe to say that the coming spring in Germany will be a hotter political spring than last year’s “hot autumn”. Farmers’ organisations are already calling for mass demonstrations against the end of agricultural diesel. The AfD should support the public protests against state-imposed exploitation with a major campaign of its own. Only (early) new elections and a blue federal government can put an end to this madness.


[1] Seibel K. (2023). Flucht und Migration kosten Deutschland dieses Jahr fast so viel wie die Bundeswehr. Welt. URL:

[2] Bild (2023). Bürgergeld völlig außer Kontrolle. URL:

[3] Kofner J. (2022). Ökonomische Auswirkungen der im Ampel-Koalitionsvertrag skizzierten Wirtschaftspolitik. MIWI Institut. URL:

[4] Handelsblatt (2020). Bundestag beschließt CO2-Abgabe. URL:

[5] BMF. (2023). Nettokreditaufnahme des Bundes von 2005 bis 2022. URL:

[6] For the estimations see: Kofner J. (2023). Grünflation stoppen: CO2-Abgabe abschaffen! MIWI Institut. URL:

[7] Umweltbundesamt (2023). Rekordeinnahmen im Emissionshandel: Über 13 Milliarden Euro für den Klimaschutz. URL:

[8] Walker A. (2023). Neue Plastik-Steuer der Ampel: Was für Verbraucher dadurch alles teurer wird. FR. URL:

[9] European Commission (2019). Taxes in the Field of Aviation and their impact. URL:

[10] Ibel C. (2023). „Kampfansage an Landwirtschaft“: Bauern toben wegen Agrardiesel-Streichung. FR. URL:

[11] BDEW(2023). Redispatch in Deutschland 2022. URL:

[12] Stratmann K. (2023). Netzentgelte verdoppeln sich 2024. Handelsblatt. URL:

[13] rnd (2023). Verlängerung von Energiepreisbremsen kostet Staat rund 14 Milliarden Euro. URL:

[14] Kofner J. (2023). Grüne Preistreiber stoppen! Reduzierte Mehrwertsteuer in der Gastronomie muss bleiben! MIWI Institut. URL:

[15] Zinke O. (2023). Gaspreise steigen wegen Mehrwertsteuer – mitten in der Heizsaison. agrarheute. URL:

[16] Kofner J. (2023).  CO2-Maut: weitere Inflation und Deindustrialisierung. MIWI Institut. URL:

[17] Kiel Institute (2023). Ukraine Support Tracker. URL:

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