This is a situation where national size actually does matter. Luxembourg is effectively only offering local/metro level free transit, since the country is tiny

This is a situation where national size actually does matter. Luxembourg is effectively only offering local/metro level free transit, since the country is tiny. Germany, on the other hand, has regional trains criss-crossing the country that are also free. Yes, the faster IC trains aren't included, but slower trains that go quite far are included. So, while Germany is indeed charging rather than making them free, they're also offering more than Luxembourg is.