Parties spar on economy; Lapid slams tax increases

Leaders from five of the biggest political parties sparred over the economy Thursday during a conference at the Dan Panorama Hotel in Tel Aviv hosted by the Chamber of Commerce.

Presenting their outlook for how best to manage Israel’s economy, Labor’s Shelly Yacimovich, Yesh Atid’s Yair Lapid, Yisrael Beytenu’s Avigdor Liberman, Tzipi Livni and the Likud’s Yuval Steinitz took to the stage to make their case to the country’s business elite.

The room may have been full of political stars, but most of the attention was lavished upon the middle class, small and medium businesses, lower taxes and dysfunction in the political system.

Lapid came out swinging at the government for the tax increases that went into effect at the start of the year, saying they exemplified a lack of priorities.

“The Israeli middle class has turned into [Prime Minister Binyamin] Netanyahu’s ATM,” Lapid said, slamming decisions to boost taxes while spending recklessly on things like a financially unstable electric utility, overpaid port workers in Ashdod, subsidies to the ultra- Orthodox and a bloated public sector.

“How dare they sit there with 34 ministers and deputies,” he asked, “and then come to the middle class and tell them they’re taking another NIS 1,800?” Ministers without portfolio cost the taxpayers NIS 60 million, he said, the same amount that parents of autistic children have requested in social aid.

That statistic, he said, demonstrated misplaced priorities.

A distorted political process was partly to blame, Lapid said, singling out Shas as a party that pulls aside public money for its own constituency.

“That’s what I want to be – the Shas of the Israeli middle class,” Lapid proclaimed.

Former foreign minister Avigdor Liberman agreed that the political process was not ideal for economic management, saying the low electoral threshold made governing too difficult.

According to polls, he said, 14 parties were due to take seats in the upcoming Knesset.

“I’m not saying we’ll be like the United States with two parties – with our demography and sociology we never will – but five or six is enough.”

Yacimovich, responding to Steinitz’s frequent critiques that her economic plan would bust the budget and drive business away with higher corporate tax rates, vowed not to raise taxes on small- and medium- sized enterprises (SME’s).

“Read my lips,” she said, echoing the famous (broken) promise of former US president George H. W. Bush. “I want to say that in our economic program we will not raise taxes on small and medium businesses.

On the contrary, we’ll make their lives easier.”

In Israel, she said, the percentage of loans directed at small businesses in proportion to GDP came to 20 percent. In contrast, the OECD average stood at 40% and as high as 50% for countries like France and Germany.

“Companies at the very top pay an effective tax rate of 2%, 6%, 9% – you know it happens – while small and medium businesses pay the full rate. It’s not logical and it’s not acceptable,” she continued, adding that changing bank regulations to redirect credit wouldn’t add a dime to the budget.

Speaking after Yacimovich, Steinitz, the current finance minister, renewed his assault on her plans.

“I don’t know what’s more imaginary – promising to spend NIS 140 billion or the fact that someone who has never run anything, with no security experience, who has never even headed the finance committee, would be prime minister,” he said, drawing a handful of boos from the audience.

Having been at the helm of the economy for the past three years, Steinitz spent the majority of his time talking up the success of the Israeli economy.

With no certainty that he would reprise his role in the next government, he seemed more intent on sealing his legacy than offering plans for the future.

Livni, on the other hand, presented the business leaders with an alternative economic priority: peace with the Palestinians.

“In my eyes, an agreement is the most important thing for the economy, for social disparities,” she said, blasting Netanyahu for isolating Israel internationally. “All of Europe is looking at labels, checking to see if they say ‘made in Israel,’ and it will say ‘made in Israel’ because, heaven forbid, the government should differentiate the settlements.”

The nation’s budget was being misdirected toward settlements and the ultra-Orthodox, she added.

“Money is wasted moving people from hill to hill in places that everyone knows, painfully, and I mean really painfully, will not be part of the future state of Israel,” she said.

Livni also laid out a handful of moderate economic priorities.

She said she believed in the struggle against market concentration, but not as incitement against business owners.

She cited the need to protect social and worker’s rights, but not by imposing strict government supervision.

She also said she believed in the free market, but with government intervention in cases of market failure. She cited the five basic things that, according to revisionist Zionist leader Ze’ev Jabotinsky, government should provide: food, housing, clothing, health and teachers. To those she added police and personal security.

“I don’t believe in Netanyahu’s capitalism, with no government intervention,” she said, “but on the other hand I am opposed to the old socialism Shelly Yacimovich is selling.”

The unabashedly vocal audience of business owners and Chamber of Commerce members had no compunction challenging the speakers, booing and heckling as they saw fit, often in surprising ways.

Liberman’s call for government to keep its hands off business elicited claps from one lone audience member, while Yacimovich’s defense of social equality drew roars of applause.

The one person who seemed determined not to be taken in by any of the politicians was the freshly reelected head of the Chamber of Commerce, Uriel Lynn.

“The government takes what you make and distributes it, but it doesn’t make it,” Lynn, a former Likud MK, said in opening remarks that included praise for Israel’s dynamic economy.

While saying the economy could improve by filling out the labor force, reducing the size of government and strengthening the private sector, he voiced doubts that the government was up to the task.

“The real motor of growth is the motivation of each and every one of you to build a business, to take a risk,” he said. “The Knesset of Israel has not succeeded in understanding this basic fact.”