The new year may promise a fresh start, but it may not have gotten off on the
right foot for consumers: A rise in utility prices went into effect Tuesday, and
middle-to-high-income earners saw their income tax bills go up as part of a
series of planned tax hikes.
As party-goers kissed 2012 goodbye, water
prices rose by 3.5 percent, and municipal tax (arnona) inched up 2.3%. If that
were not enough, electricity prices rose a scheduled 4.4% and are expected to
increase still more in the year ahead.
Nurit Felter-Eitan, spokeswoman
for the Public Utility Authority, said the high electricity demand this past
summer and decreasing natural gas supplies are expected to result in a decision
to increase prices further in April. She dismissed as speculation media reports
that the increase would be as high as 16%.
Since September, consumers
have also contended with a value-added tax increase from 16% to 17%.
But
even those who can more easily stomach price increases saw bigger threats to
their pocketbooks starting in the new year.
In August, the government
approved a series of austerity measures and tax increases to bring the
ballooning deficit down to a 3% target. The package included an increase of one
percentage point in income tax for the two tax brackets between NIS
14,000-41,830 per month, and a two-percentage-point increase for income above NIS
67,667 per month.
In 2013, people making NIS 14,000-20,000 a month will
pay 31% in income taxes instead of 30% as they did in 2012, while those making
NIS 20,000-41,830 will pay 34% instead of the previous 33%.
The bracket
above NIS 41,830 will remain stable at 48%, but an additional 2% surtax has been
levied on all annual income over NIS 800,000, excluding income from taxexempt
home sales. Employer contributions to the National Insurance Institute for all
workers who earn over 60% of the average salary rose to 6.5% from
5.9%.
The working poor, however, got a break.
“Negative income
tax,” which provides a supplement for the working poor, increased 150% for all
working mothers and single working fathers.
With the 2013 budget slated
to be the first political hurdle following the January 22 election, further
fiscal gloom is lurking just around the bend.
Already, spending
projections are some NIS 14 billion over legal targets, meaning they will have
to be cut, and Bank of Israel Gov. Stanley Fischer warned last week that once those were worked out, additional tax increases might be necessary to keep the
deficit in check.
Labor leader Shelly Yacimovich took the government to
task for bringing “bad news” in the form of higher prices on water, electricity
and other products.
“What we’re seeing today is just a promo for what we
can expect the day after Netanyahu is reelected,” Yacimovich said at a press
conference in Tel Aviv, adding that her party would “offer an economic
alternative, a detailed plan that can increase families’ net income.”
The
Labor leader pointed out that Netanyahu had promised before the 2009 election to
lower taxes by 20%.
He did so, she said, but for the wealthy and not the
average citizen.
“Netanyahu increased the tax burden on the middle class.
We won’t raise taxes for the middle class – we will lower them through graduated
VAT. We won’t hurt small and medium- sized businesses, but give moral and
economic responses to fill the [budgetary] hole that Netanyahu created,” she
said.
Yesh Atid leader Yair Lapid, meanwhile, said the tax hike would
make the middle class “explode.”
“The Netanyahu government is continuing
to trample the middle class and put it in an intolerable situation,” he
remarked.
He called for the government to cut funding to settlements and
haredim to fill gaps in the budget, rather than “put its hand time and again in
the pocket of the middle class.”
Tzipi Livni, leader of The Tzipi Livni
Party, said the Netanyahu government was “spitting in the face of the public and
ignoring Israeli citizens.”
According to Livni, the government should
lower indirect taxes and cancel high VAT, rather than charge high taxes and use
them on settlements.
“This government’s order of priorities is defective,
lacking in values and not Zionist,” she stated.
“Instead of rewarding
good Israeli citizens who serve in the army and reserves and pay taxes, for four
years this government cared only about those who don’t contribute to society or
the economy out of narrow political interests.”
Amir Peretz, third on The
Tzipi Livni Party list, said the government was trying to trick the public
before the elections, and that the rise in prices would continue after the
“major decrees” planned by Netanyahu.
“This is a disconnected government
that harms citizens’ ability to earn a living with dignity,” he added.