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'Post' Analysis: Statistics don't lie, politicians do
By NIV ELIS
01/16/2013
If you repeat anything enough times, voters will believe you. That’s what politicians hope, anyway.
 
If you repeat anything enough times, voters will believe you. That’s what politicians hope, anyway.

With only a week until the election and the economy serving as a central flash point, politicians from across the board have been peddling statistics that range from carefully calibrated deception to outright falsehoods.

Finance Minister Yuval Steinitz, for example, has done his best to remind the public that despite the soaring deficit and slowdown in economic growth, Israel still has a healthy economy, especially in comparison to other member countries of the Organization for Economic Cooperation and Development. “Economic growth in the past year was the highest of the Western nations,” he said on Tuesday.

That’s good to hear – just don’t tell Mexico. Its GDP growth in 2012 was pegged at around 4 percent, higher than Israel’s 3.3%. Australia’s final growth figure was expected to come out at a similar rate. According to tentative figures in The Economist, Turkey and Norway also edged out Israel in 2012.

Former Treasury accountant-general Yaron Zelicha, of Labor, said on Channel 2 Tuesday that high growth relative to the OECD was no victory.

“We are the poorest country in the OECD, so we should be growing double,” he claimed.

The poorest country in the OECD? Except for about twelve of them. If you look at GDP per capita, Israel actually comes out ahead of 35% of the OECD’s 34 member states: Greece, Slovenia, South Korea, Portugal, the Czech Republic, Slovakia, Estonia, Chile, Hungary, Poland, and despite their GDP growth, Turkey and Mexico.

But that’s not the end of it.

Since the final budget deficit of NIS 39 billion for the year was announced on Sunday, politicians have been having a field day with statistical stretches. “If we divide the deficit between the 2 million families in Israel, each will have to pay NIS 18,000,” Labor leader Shelly Yacimovich said Tuesday, repeating a statistic that has become a regular talking point.

Nevermind the fact that a NIS 39b. deficit divided among 2 million would actually be NIS 19,500 per family, which would actually strengthen Shelly’s claim – the number remains awfully misleading.

The reason is that Israel does not have a flat tax system, nor does it rely solely on taxes paid by families to bring in revenue.

According to figures from the Finance Ministry, of the NIS 218.6b. in tax revenues Israel took in 2012, about a fifth (NIS 41.8b.) came from taxes on companies and self-employed individuals.

Another 28% or so (NIS 61.2b.) came from value-added tax, customs and sales taxes on imports (though some unspecified portion of the VAT was returned). In fact, less than half (NIS 100.6b.) came from income tax.

The progressive income tax structure, in which the poorest workers actually earn “negative income tax” and higher earners pay higher rates, also means that portion was not equally distributed among Israel’s families.

Furthermore, the long-term plan to reduce Israel’s overall debt burden doesn’t call for eliminating the deficit altogether – it calls for a targeted deficit of about 3%.

Even if she keeps using this useless measure, Yacimovich should subtract from it the nearly NIS 13,000 in “debt per family” that a sustainable 3% deficit would entail, though her final number wouldn’t sound as impressive.

Finally, at the start of the year, Yesh Atid leader Yair Lapid slammed the government for increasing taxes, castigating them for spending recklessly before they “come to the middle class and tell them they’re taking another NIS 1,800.”

Income taxes did, indeed, go up, but only on a handful of tax brackets, starting at a 1% increase for income over NIS 14,000. Now, someone making NIS 15,000 a month – comfortably middle class – would earn NIS 180,000 a year, which means that a 1% increase would, in fact, be NIS 1,800 more, right? Well, no. That’s not how income tax is structured in Israel. Instead of simply applying the tax rate associated with an individual’s total income bracket, the government actually charges different rates for each level of income earned. The first NIS 5,200 you earn a month isn’t taxed at all. The income between NIS 5,200-8,880 is taxed at 10%. From NIS 8,800 to 14,000 it’s taxed at 21%, and so on up.

Because tax increases only went up for the top brackets, the 1% increase actually means that Lapid’s middle class NIS 15,000-a-month earner did not suddenly have an extra NIS 1,800 to pay at the end of the year.

Instead, they would only pay an extra NIS 120.

But don’t worry, Yair, you were only off by a factor of 15.

With that level of mathematical error permeating the country, is it any wonder the deficit was double the original projections?
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