Germany is close to an absolute record in tax revenue, says the head of the Taxpayers’ Association, Reiner Holznagel, in an interview. Against this background, he cannot understand why a dispute over the budget has broken out again.

The 2025 budget is being negotiated, the finance minister is putting the brakes on, the ministers are overshooting the mark – is this more than the usual spectacle this time?

Reiner Holznagel: Budget negotiations are always a spectacle. Sometimes less in substance, but more of a show of party-political prestige projects.

It’s about leaving a mark, and the ongoing discussion about the debt brake also plays a role here. It’s no coincidence that those who would most like to abolish it now don’t want to comply with it. This is another reason why the traffic light coalition partners’ ideas differ so much.

If the traffic light coalition is to continue, a consensus must be found. For me, this can only consist in adhering to the debt brake, as the Basic Law requires.

Have you actually noticed that savings were made anywhere after the Constitutional Court’s ruling on the failed budget in November?

Holznagel: There was a lot of lamenting after the ruling, but not much savings. Only two budgets will have to be cut back slightly in 2024 compared to the government draft from summer 2023.

The Karlsruhe ruling came between the draft and the approval of the 2024 budget. Major cuts in the development department were announced, but the result was less than 3 percent.

There can be no talk of a savings budget in 2024. Overall, the draft budget envisaged spending of 446 billion euros, but the Bundestag approved 477 billion euros. More than 30 billion on top!

Have the shadow budgets even begun to disappear?

Holznagel: The shadow budgets must go because they distort the reality of financial policy. Politicians in particular, but not only, draw the wrong conclusions from this distorted picture and fail to recognize the real need for action. This applies in particular to the Bundeswehr special fund and the climate and transformation fund.

The traffic light coalition only sacrificed the economic stabilization fund to finance the energy price caps. Otherwise, there were accounting corrections in various shadow budgets.

In principle, the Federal Constitutional Court has not prohibited special funds, but only their covert financing through debt. In doing so, Karlsruhe is forcing politicians to be more honest. As already mentioned, the best option would be a budget without any special funds at all.

Given the budget negotiations, how seriously do you take the FDP’s threats to withdraw from the coalition?

Holznagel: Chattering is part of the job, the elections are getting closer. But this affects all parties equally. It is not just parts of the FDP that are threatening to end the coalition.

In addition, various position papers with a handful of points fit in, in which the traffic light parties – each for themselves – once again summarize their central messages.

Either way, I firmly believe that there will ultimately be a government draft for the 2025 budget.

Regarding the current negotiations: Where do you think there is scope for substantial savings?

Holznagel: The fact is that there is not a single item in the federal budget that can be cut and the budget will be balanced. We as the Taxpayers’ Association regularly show with our proposals that there is potential for cuts in every ministry.

This affects not only program spending or financial aid, but also the federal government’s own consumption. Administrative spending has increased, as has the increase in personnel – and this entails a great deal of further expenditure.

There are ways to save money in the short term, for example in terms of subsidies. But the main focus must be on the long-term cost development in the federal budget, and the famous course must be set for this now.

That is why we need, for example, different personnel planning, better digitalization or an efficient construction and property concept.

Do you have examples of absolutely unnecessary projects?

Holznagel: The proposed basic child benefit, the fixing of the pension level at 48 percent or the federal government’s construction activities in Berlin are just as much a part of this as many subsidies. There are always arguments for various projects.

Now it is a matter of complying with the constitution on the one hand and fulfilling our own plans on the other. The coalition originally wanted to spend around 25 billion euros less for 2025 and that must also apply.

By the way, there is a difference between preparing a budget and implementing it. We hear that this year, too, some of the funds are not being spent as planned.

Germany will collect less taxes than the estimators originally expected, but revenues will still rise significantly. Do we have a spending problem or a revenue problem?

Holznagel: The question is as simple as it is clear to answer. Anyone who can post record tax revenues year after year – despite a sluggish economy – has no problem with revenues.

We are about to exceed the trillion mark in tax revenues for the first time. Anyone who cannot manage with all this taxpayer money has a problem with their spending and their expectations. That is why there is no way around spending priorities.

Does the debt brake actually only exist on paper?

Holznagel: Not at all, otherwise we wouldn’t have so much dispute about our most important fiscal rule. Karlsruhe has once again clearly highlighted the meaning and purpose of the debt brake. Nevertheless, politicians at federal and state level are constantly looking for ways to release the brake without anyone noticing.

Thanks to our open eyes, this game of hide-and-seek does not work, because the Taxpayers’ Association exposes and criticizes such tricks. Unfortunately, it is a laborious business, but a necessary one in the interests of intergenerational justice.

We must persuade politicians to accept the debt brake without compromises or accounting tricks.

In view of a global subsidy race – should we continue to insist on the debt brake?

Holznagel: Basically, one has nothing to do with the other. Even if the coalition wanted to provide even more subsidies, the debt brake would not prevent this if savings were made elsewhere!

Basically, subsidies have a questionable effect and become permanent far too quickly. However, long-term subsidies cost taxpayers a lot of money every year, but the stimulus is dwindling noticeably. A subsidy race is therefore never sustainable, something the USA is also painfully aware of with its record debt.

Keyword USA: here most subsidies are granted in the form of tax breaks. Here we see Germany fundamentally required to improve the framework conditions for economic growth. In some cases, this does not cost a lot of money.

We need rapid administrative digitization and a noticeable reduction in bureaucracy for the state, companies and citizens. Germany must become more agile and flexible, the economy needs freedom for innovation and growth. The question of subsidies will then take a back seat.

The traffic light government is entering its final year of the legislative period – what has it done for the taxpayer – or not done? How does it compare to previous governments?

Holznagel: This coalition is dealing with multiple crises. That was and is certainly a major challenge and in some cases there has been a good response. We have also seen many approaches to improving the framework conditions.

Unfortunately, many projects have been watered down or even abandoned. However, the positive approaches are overshadowed by the constant coalition conflict. All three partners are pulling together, but in different directions. In addition, this coalition appears to be weak in making decisions.

This impression is causing political frustration, particularly in the east of the country. The title of the coalition agreement, “Dare to make more progress,” has not yet been fulfilled.

The article “It’s about our money! Taxpayers’ Association explains how Ampel can save money now” comes from Business Punk.