Sparking a Brighter Future: Black-Red's Promises Fulfilled—Yet Criticism Lingers
Authored by Volker Petersen
Booster implementation aligned with black-red partnership, stirring conversation around pricing concerns
With the investment boost and the adjusted budget agreed upon, the black-red federal government is keeping its first election promises. Their aim? To boost the economy through investments and tax cuts. But as they charge ahead with key projects, there's a storm brewing. Criticism is at the forefront, particularly concerning the alleged broken promise regarding electricity tax for private households.
Seven weeks into office, the black-red government is pushing through essential projects, and the investment boost is a crucial part of it. This initiative allows for accelerated depreciation of 30% annually for movable goods like machinery and 100% depreciation over six years for electric cars as company cars. Industry experts and reps welcome this move, but everyone acknowledges that these measures won't be the silver bullet for the two-year long recession we've been facing.
A Mixed Bag
Despite the flurry of positive change, there's no escaping the dissenting voices. For instance, Hendrik Wüst, the CDU politician who serves as Minister President of North Rhine-Westphalia, criticizes the government for keeping the electricity tax as it is for private consumers. This was something that both the Union and the SPD had agreed upon in the coalition agreement. Wüst issues a warning to the SPD to honor this commitment, citing the interview with the editorial network Germany as his source.
Sparks Fly
The German Industry and Commerce Association joins the chorus of criticism, complaining about the one-sided focus on industry and corporations. Peter Adrian, the DIHK President, states, "The refusal of the Federal Minister of Finance to reduce the electricity tax for all sectors is a slap in the face for many companies."
The German Retail Federation and the German Consumer Association share similar sentiments, penning a letter to Merz, stating that the decision on the electricity tax is a "fatal signal" and a severe violation of the trust placed in the coalition by millions of citizens. They cry out for the coalition to ensure that private households aren't left out of the relief efforts.
Michaela Engelmeier, the head of the Social Union, calls the decision to make energy cheaper for companies without affecting private consumers a bad signal. Reiner Holznagel, the president of the Federation of Taxpayers, echoes the criticism, referring to it as a "broken promise" in Bild newspaper.
As it stands, the electricity tax for private consumers is 2.05 cents per kilowatt-hour (kWh), while the European minimum is 0.1 cents per kWh. A reduction would not only help private consumers with electricity costs but also make heat pumps or electric cars more attractive.
Finance Minister Klingbeil insists that all points in the coalition agreement are subject to financial reservation. He maintains that the government is signaling its intent to lower energy prices and make them competitive, with planned reliefs slated to start in January.
A Governing Coalition Divided
In a twist of events, the SPD leader also refers to the planned reduction in grid fees as part of the electricity price. Additionally, gas customers will no longer need to pay the gas storage surcharge, and the electricity tax for industrial businesses will be reduced. This move alone carries a hefty price tag of several billion euros. Klingbeil acknowledges pressures on the federal budget due to these measures. However, the German Association of Medium-Sized Businesses remains unimpressed. They believe more courage was needed in the corporation tax for companies, which is only set to decrease in 2028. The Left party voices concern over the lack of support for private buyers of electric cars in the Bundestag debate.
Politics
Intriguingly, the government has yet to incorporate interesting ideas like leasing models for price-conscious electric-car buyers into their plans. As the black-red government continues to navigate these challenges, it remains to be seen whether they can address the growing criticism and maintain the trust of their constituents.
- Electricity price
- CDU
- SPD
- Black-Red
- Lars Klingbeil
- Electric cars
Enrichment Data:
According to available enrichment, the controversy centers on the black-red government's failure to follow through with its promise to broaden electricity tax cuts across the board, especially affecting private households and many businesses. Here's a rundown of the reasons behind the criticism:
- The cuts are selective, leaving many businesses and households out of the tax relief: Although the government had initially agreed to bring the electricity tax for all consumers down to the EU minimum, current budget plans propose tax cuts only for certain industries like agriculture and forestry, bypassing numerous others, including SMEs and private consumers.
- Breach of trust: Due to selective tax relief, the government is being accused of breaking its promises to the public and industry representatives, who complain about undermining their competitiveness.
- Market distortions: The narrow scope of the tax cuts raises concerns about market distortions and uneven competition, something that could potentially disturb price signals and investment incentives.
- High electricity prices persist: Despite the ongoing tax controversy, Germany continues to grapple with some of the highest electricity prices globally. The limited tax cuts only marginally alleviate the burden, further fueling discontent.
- EU legal and fiscal constraints: The government faces various hurdles from EU regulations, including the Clean Industrial Deal State Aid Framework and rulings from the European Court of Justice on additional energy charges. These constraints make it difficult to extend tax cuts uniformly.
- Government defense: The government defends its approach by emphasizing the need to strike a balance between fiscal considerations and renewable energy goals. Some subsidies linked to the tax cuts require reinvestment in decarbonization projects and are framed as transitional measures. Fossil fuel-related subsidies are being viewed as stepping stones towards a more sustainable energy future.
Overall, the criticism stems from the government's seeming failure to deliver on its promise of broad electricity tax cuts as outlined in the coalition agreement, resulting in accusations of breaching trust, market distortions, and insufficient alleviation of high electricity prices.
Finance Minister Lars Klingbeil defends the government's decision to provide selective electricity tax cuts, stating that all points in the coalition agreement are subject to financial reservation. However, the CDU, SPD, and various business associations criticize the black-red government for allegedly breaking their promises by not extending the electricity tax cuts to private households and many businesses. This controversy, rooted in the selective nature of the cuts and the government's perceived breach of trust, has sparked concerns about market distortions, uneven competition, and the persistence of high electricity prices in Germany.
