_ J.C. Kofner, economist, MIWI Institute. Munich – Graz, February 5, 2025, first publication in FREILICH Magazine.
Based on studies by leading institutes, economist Jurij C. Kofner refutes the accusation that the AfD’s tax plans would primarily benefit top earners and are not affordable. In his analysis for FREILICH, he shows that they provide relief for the middle classes and employees in particular and are feasible.
As in every election campaign, the mainstream media launched a wave of negative reports on the AfD’s tax plans at the start of the hot phase of the Bundestag election campaign in mid-January 2025. Both the state broadcasters’ court reporters and the journalists of left-leaning media outlets based their critiques on new calculations from no fewer than three leading research institutes: ZEW, IW Cologne, and DIW.
The two central allegations are as follows:
- The AfD’s tax plans would primarily benefit the wealthy while offering little relief to lower and middle-income earners.
- The AfD’s tax plans are financially unfeasible and therefore empty promises.
This article refutes both of these false claims and demonstrates that the AfD’s tax plans are not only financially viable but also provide substantial relief, particularly for the middle class and workers.
Radical Tax Simplification and Relief
Unlike all other parties—including the formerly market-oriented FDP—the AfD pursues the most radical plans for tax simplification. The party’s program not only envisages massive tax cuts but also the complete abolition of numerous taxes.
Against this backdrop, Chancellor candidate Alice Weidel is correct in describing the AfD as a “libertarian party” in her conversation with Elon Musk, even though the AfD continues to adhere to a freedom-oriented and ordoliberal approach. In terms of tax policy, the party comes closest to the libertarian approach of Javier Milei in Argentina, while remaining socially conservative, akin to the views of J.D. Vance in the United States.
The AfD’s Key Tax Reform Proposals:
- Raising the basic income tax allowance to €15,000
- Introducing family income splitting
- Raising the savings allowance to €6,672
- Eliminating fiscal drag (cold progression)
- Abolishing the solidarity surcharge
- Abolishing property tax
- Eliminating the real estate transfer tax for first-time owner-occupied properties
- Abolishing inheritance and gift tax
- Lowering corporate taxes (corporate income tax and trade tax)
- Abolishing the CO₂ tax and withdrawing from the EU Emissions Trading System
- Reducing electricity and energy taxes
- Eliminating the broadcasting fee
- Reducing VAT for the hospitality industry to seven percent
A Paradigm Shift in the Tax Policy Debate
The current Bundestag election campaign marks a remarkable shift in the tax policy debate: for the first time, even established research institutes can no longer ignore the AfD’s tax proposals in their analyses. This is a significant achievement for the party, which, compared to the 2021 Bundestag election, was previously excluded from tax policy discussions. With current polling figures ranging from 22 to 25 percent, the AfD has become a political force that even the so-called “system economists” can no longer bypass. But what exactly do the latest studies from the renowned institutes ZEW, IW Cologne, and DIW say about the AfD’s tax proposals?
ZEW: The Media’s Distorted Coverage
The authors of the ZEW study claim that top earners would benefit from the AfD’s tax plans. However, journalists have misrepresented this by constructing a one-sided false narrative, suggesting that the AfD’s tax plans primarily favor high earners. This is simply incorrect.
First, it is important to note that the ZEW analysis focuses exclusively on tax and social policy measures that directly affect income. In this context, left-green parties appear to offer greater benefits to non-earners and low-income individuals, as they prioritize increased welfare benefits, such as higher citizen’s allowance (Bürgergeld) and a so-called “climate bonus.” However, the AfD’s tax relief for lower and middle-income groups would primarily come from reducing or abolishing various consumption taxes—such as CO₂ pricing, energy and electricity taxes, and the broadcasting fee. These measures were not examined in the ZEW study and are therefore not accounted for.
Second, a closer look at the data reveals that, compared to the FDP and CDU/CSU, the AfD provides significantly greater tax relief for the middle class (4th to 7th income deciles) (see Figure 1). While the FDP’s tax plans would provide a 4.3 percent tax reduction and the CDU/CSU’s only 1.4 percent, the AfD’s proposals would increase middle-class income by 5.3 percent. Lower-income groups (0th to 3rd income deciles) would also benefit more from the AfD’s tax policy: while the CDU/CSU’s plans foresee a tax cut of only 0.27 percent and the FDP’s 0.97 percent, the AfD would provide a 1.03 percent reduction.
Figure 1, ZEW: Tax Relief Effects of the Income Tax Plans of FDP, CDU/CSU, and AfD on Disposable Income Deciles
Source: ZEW.
Overall, the ZEW estimates that the AfD’s tax reform would result in an annual tax reduction of €97 billion, equivalent to an average household surplus of €2,380 per year. The primary beneficiaries would be single-earner families with children, underscoring the AfD’s commitment to strengthening family incomes.
IW Cologne: Largest Tax Relief for Citizens and Businesses
In contrast to the ZEW, the Institute of the German Economy (IW Cologne) examines the overall tax policies of the parties. A comparison table published by the institute reveals that the AfD is planning by far the most significant tax relief for citizens and businesses (Figure 2). While all other parties propose, in some cases, massive additional burdens through new taxes and tax increases, the AfD intends to reduce the tax burden by a total of €149 billion. This equates to an average relief of €3,550 per household.
Figure 2, IW Cologne: Comparison of Party Tax Plans
Source: IW Cologne, Statista.
Notably, IW Cologne deliberately avoids mentioning the AfD by name in its accompanying text. This is unlikely to be coincidental but rather a political decision: Institute Director Michael Hüther is a well-known transatlanticist and a vocal opponent of the AfD. Nevertheless, his economists could not avoid acknowledging the financial impact of the AfD’s tax plans.
DIW: Even a Green-Aligned Institute Confirms AfD’s Plans
Particularly noteworthy is the analysis of the German Institute for Economic Research (DIW), which has traditionally been closely aligned with the Green agenda. Even this institute concludes that the AfD’s tax plans provide greater relief to lower and middle-income groups than to top earners (Figure 3). While top earners would see a relief of 0.8% of GDP, middle-income groups would benefit by 1.6%, and lower-income groups by 1% relative to economic output. This is primarily due to the previously mentioned reductions in consumption taxes, including the abolition of CO₂ pricing, broadcasting fees, and the reduction of energy and electricity taxes.
Figure 3, DIW: Fiscal Relief Effects According to AfD’s 2025 Federal Election Program
Source: Stefan Bach, DIW.
Even more astonishing is DIW’s estimate that the total economic relief from the AfD’s tax reform would amount to €181.2 billion per year—higher than any other institute’s calculation. This would correspond to an average relief of €4,300 per household.
The Feasibility of the AfD’s Tax Plans
Now to the question of feasibility. The AfD’s radical tax plans would reduce the tax-to-GDP ratio from the current 23.1% to between 20.8% and 18.8%—a level not seen since the Weimar Republic. The revenue shortfalls for the federal budget, estimated by research institutes at between €97 billion and €149 billion, or even €181.2 billion, are substantial, amounting to 20% to 40% of the federal government’s annual expenditures.
Nonetheless, an AfD-led government could finance its tax relief promises primarily through two channels:
- A Return to a Lean Regulatory State – The AfD plans a drastic reduction in government expenditures, particularly in Green transformation projects such as climate policy, the asylum industry, the energy transition, gender policies, and financial transfers abroad. According to the AfD parliamentary group in the Bundestag, these measures could save up to €106.2 billion in the 2024 federal budget. These savings alone would allow the AfD’s income tax reform to be fully funded with a €9.2 billion surplus, according to the ZEW. Based on the figures from IW Cologne and the ZEW, the remaining funding gap for the AfD’s overall tax plans would be reduced to €97.8 billion or €132.1 billion, respectively.
- Economic Growth as a Revenue Generator – Since 2019, the German economy has stagnated, with the inflation-adjusted GDP index even declining slightly. This represents a prolonged economic crisis not seen since the Great Depression of 1929. An AfD government would not only implement drastic tax cuts but also significantly relieve domestic businesses through deregulation, the abolition of the energy transition, and a skilled labor initiative. These measures would stimulate economic growth and expand the overall economy, which, in turn, would generate increased tax revenues through so-called “second-round effects.” Even if the tax-to-GDP ratio declines, a larger economy would still yield higher tax revenues.
No new government can fully implement its tax reduction and tax abolition promises immediately within its first year. However, assuming a modest economic growth rate of 1.62% per year—similar to Germany’s average growth during the “good years” from 2013 to 2019—an AfD-led government could gradually implement its entire tax relief program over its first legislative term, completing it by the fourth year. According to IW Cologne’s figures, this would result in a budget surplus of €8.4 billion by 2028.
The €181.2 billion funding gap estimated by DIW would be significantly reduced through spending cuts and the fiscal second-round effects of economic growth, though not entirely eliminated. After four years, a shortfall of €25.9 billion would remain. Consequently, the AfD would need to defer approximately one-seventh of its fiscal promises to a second legislative term.
But let’s be honest: even if the AfD were to implement only half of its election program, it would still represent the most significant economic policy shift in Germany’s post-war history.