A €2.5bn Fuel Tax Cut, a $5,000 Promise and the Limits of Paying Voters

Friedrich Merz’s Christian Democrats won 4.9% of the vote in the Mecklenburg-Western Pomerania election on 20 September. That left the CDU below the 5% threshold and out of the chamber. Five years ago the party won 13.3% there. The far-right AfD came first with 38.2%, on preliminary figures.

Two days before the vote, the coalition in Berlin agreed a fuel tax cut of about 17 cents a litre. It runs from 1 October to the end of the year and costs about €2.5bn. It’s the second cut this year. The first cost €1.6bn and covered May and June, after a Bundestag vote on 24 April. The CDU fell anyway.

Germany isn’t alone. Donald Trump has promised every adult citizen $5,000 if Republicans win the midterms. Brazil has raised family benefits weeks before a presidential vote. The 2026 oil price shock has given governments a ready reason to spend. For households, the offer is money now. The cost arrives later, in deficits and borrowing.

A payment tied to a result

Trump announced the “Trump dividend” at the Republican Midterm Convention in Dallas on 9 September. “If the Republicans win, you win with us and you get $5,000,” he said. A White House statement made the payment conditional on Republicans winning both the House and the Senate. It gave no cost and no funding source.

With roughly 245 million adult citizens, the payment would cost about $1.2tn. Vice-President JD Vance has pointed to tariff revenue. The Tax Foundation estimates tariffs raise $158bn to $208bn a year. Any payment would need an act of Congress.

Voters like the money more than the promise. A YouGov/Economist poll of 1,461 registered voters found 48% support the payment. Only 21% think Trump will probably or definitely deliver it. In a Reuters/Ipsos poll taken over the same days, 63% called the link to a Republican win inappropriate.

Governments have always spent before elections. A national payment promised only if one party wins is new. It turns a tax-and-benefit decision into a campaign pledge. Some political opponents are simply calling it bribery. Chuck Schumer, the Senate minority leader, accused Trump of “trying to bribe the American people for their votes”.

Where the money didn’t save the incumbent

Hungary is the clearest recent test. Viktor Orbán’s government widened income tax exemptions for mothers before the April election. It also added a “14th-month” pension and kept energy and fuel subsidies, according to analysis by Zsolt Darvas at the think tank Bruegel. He projects a 2026 deficit of 6.2% of GDP, against a January 2025 plan of 2.5%. On 12 April, Péter Magyar’s Tisza party won a two-thirds majority, ending Orbán’s 16 years in power.

In the Indian state of Tamil Nadu, Chief Minister M.K. Stalin paid 5,000 rupees each to 13.1 million women on 13 February. The transfer cost 65.5bn rupees. It landed before election rules could freeze new payments. His DMK then lost power to the actor Vijay’s new party, Tamilaga Vettri Kazhagam, which won 108 of 234 seats.

Japan tried twice, with opposite results. Before the July 2025 upper house election, Shigeru Ishiba pledged ¥20,000 to every citizen, at a cost of more than ¥3tn. His coalition then lost its upper house majority. In February, his successor Sanae Takaichi campaigned on a two-year suspension of the 8% consumption tax on food. It would cost about ¥5tn a year. Her Liberal Democratic Party won 316 of 465 seats on 8 February, the largest single-party win in postwar Japan.

Where it seemed to pay off

Maharashtra launched its Ladki Bahin scheme in June 2024. It pays 1,500 rupees a month to women aged 21 to 65 in households earning under 250,000 rupees a year. Five months later, the BJP-led alliance won 230 of 288 seats.

Afterwards came the bill. India’s Comptroller and Auditor General found that state spending on women’s welfare rose from 2.6bn rupees in 2023-24 to 335.5bn rupees in 2024-25. A rising revenue deficit would mean more borrowing, the auditor warned. Identity checks cut beneficiaries from 24 million to 17 million, and more than 14,000 men had been enrolled.

In March 2025, Anthony Albanese’s government in Australia extended $150 energy bill rebates to every household. The extension cost A$1.8bn. The Treasury estimated it would cut headline inflation by about half a percentage point. Labor was re-elected with a larger majority in May.

Brazil is the next test. On 17 September, Luiz Inácio Lula da Silva raised Bolsa Família payments from 600 to 691 reais a month. The rise will cost 22bn reais in 2027, and the government calls it an inflation adjustment. Since January, Brazilians earning up to 5,000 reais a month have paid no income tax under a new law. A Datafolha poll puts Lula on 39% and Flávio Bolsonaro on 36% before the first round on 4 October.

What the evidence says

Research offers two findings that sit uneasily together. Adi Brender and Allan Drazen studied a large panel of democracies in a 2008 paper in the American Economic Review. Election-year deficits reduced the chance of re-election in developed countries and established democracies. They found no group of countries where deficits helped.

A study of Uruguay’s cash transfer programme points the other way. Households receiving payments were 11 to 13 percentage points more likely to favour the government, found Marco Manacorda, Edward Miguel and Andrea Vigorito. That support lasted after the payments stopped. One way to reconcile the two: a sustained, targeted programme can build loyalty. A late lump sum funded by borrowing gives voters a deficit to judge.

In Europe, the energy shock has made untargeted relief the default. Fuel excise cuts covered 55% of petrol and 63% of diesel sold this year, the International Energy Agency found in July. France and the UK left fuel taxes unchanged. Of Europe’s €11.8bn in 2026 energy support, 86% raises the incentive to burn fossil fuels, Bruegel’s tracker shows.

Brazil votes on 4 October and the US on 3 November. Those results will show whether money paid, or money promised, moves voters while prices are high.