Inside Out: Lessons from the budget buzz

For weeks now, Finance Minister Yair Lapid has come under fire for the anticipated tax hikes.

By
April 24, 2013 22:16
Finance Minister Yair Lapid speaking at the Knesset, April 22, 2013.

Lapid speaking at the Knesset 370. (photo credit: Marc Israel Sellem/The Jerusalem Post)

For weeks now, Finance Minister Yair Lapid has come under fire for the anticipated tax hikes and austerity measures that are expected to be part of the 2013 and 2014 state budgets. Pundits and political adversaries have been eager to point out that increased taxes and reduced services are going to hurt the Israeli middle class, the very people whose interests Lapid vowed to protect and advance in the Knesset.

Rising value-added tax and income tax, they noted, when coupled by lower child allowances and reduced public services, are going to make it even more difficult for Lapid’s middle class Everywoman, Riki Cohen, to make ends meet.

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Lapid’s political opponents have urged him to look beyond taxes and austerity measures in his efforts to balance the budget, each one steering him toward their own pet peeves and away from issues that are important either to themselves or their potential political allies.

Peace Now’s Yariv Oppenheimer and other ideological left-wing advocates have urged the finance minister to cut spending in the settlements. Labor Party chairwoman Shelly Yachimovich and her fellow party members have encouraged him to cut the benefits and tax breaks given to some of the “tycoons” and “big business.” Right-wing ideologues (Nadav Haetzni in Ma’ariv yesterday, for example) have called upon Lapid to take on organized labor and to break the powerful unions.

All three arguments are valid. As Calcalist demonstrated in a number of articles in 2012, the settlers received disproportionately higher budgets than other Israelis under the previous government, separate and apart from ancillary security costs. That money could have been spent either more equally or, alternatively, it could have not been spent at all, resulting in a lower deficit.

The major corporations, in many cases, were shown excessive leniency by the previous government, as in the case of Teva, which paid only 0.3 percent tax in 2012.

Had the state been less lenient, its tax revenues and royalties would have been higher, resulting in a lower deficit.

The inefficiency and, in some cases, the downright corruption in the larger unions (the Israel Electric Corporation and the Ports and Railways Authority are excellent examples), cost the general public huge sums of money every year. If employees’ salaries were lower and more proportionate, and if their work was done more efficiently, the state would have more money in its coffers and the deficit would be smaller.

As noted, all three arguments have merit.

If those distortions are remedied, the deficit would indeed be smaller. A smaller deficit would mean that fewer tax hikes and austerity measures would now have to be imposed.

For the time being, however, Lapid appears disinclined to accept Oppenheimer, Yachimovich and Haetzni’s suggestions. He has his sights set on a different costly problem that has also contributed to the inflation of the deficit – the reigning status quo with the haredim.

As he made abundantly clear this week, Lapid intends to end the situation in which the state encourages ultra-Orthodox men to remain out of the workforce and reliant on welfare. Lapid also wants to end the situation in which state-funded haredi schools fail to provide their pupils with the basic skills needed to join the workforce in the future, and is insisting that those schools teach the core curriculum mandated by the Education Ministry. The hundreds of millions of shekels that will be saved by the measures Lapid wishes to take will, similar to the measures proposed by Oppenheimer, Yachimovich and Haetzni, contribute to lowering the deficit and will help offset some of the tax burden that otherwise would have to be borne by the general public.

As expected, Lapid has come under furious attack by haredi politicians, who are afraid of the traumatic changes that lie in store for their constituents. They have responded by casting Lapid as a villainous enemy, whom they accuse of being motivated by hatred for haredim.

However, it isn’t Lapid that the haredim should be taking to task, but Prime Minister Binyamin Netanyahu, their erstwhile ally.

Lapid’s focus on the status quo with the haredim is hardly new, and his decision to prioritize that issue as finance minister should come as no surprise to no one.

Netanyahu certainly knew what Lapid’s priorities were going to be when he appointed him finance minister.

IN SOME ways it is easy to understand why the haredi politicians have preferred to ignore Netanyahu and to direct their anger principally at Lapid. He is, as noted, the perfect villain, and they might still have to work with Netanyahu again in the future.

It is less easy to understand why the general public has been so lenient with prime minister, if that is how we are to construe the public shrug of indifference. After all, Netanyahu is the man who allowed the deficit to balloon on his watch – a deficit that grew precisely as a result of the destructive status quo with the haredim, the disproportionate budgeting of the settlers, the excessive leniency with big business and his avoidance of clashing with organized labor.

Yet little has been said or written criticizing Netanyahu for his failings as the leader whose policies produced this situation. Nor has there been any discernible public outrage over the bald-faced lie Netanyahu told in his pre-election interviews, in which he said that he did not anticipate there would be any need to raise taxes.

The best and perhaps only explanation for the public’s indifference to Netanyahu’s behavior is that increasing numbers of Israelis have come to hold very low expectations of Netanyahu, who is viewed a power-hungry cynic. As long as he was partners with the haredim, Netanyahu perpetuated the costly and detrimental status quo. Now that his coalition has changed – the haredim are out and Yesh Atid is in – he is equally prepared to do away with that status quo.

When the public is unfazed by its leader’s lies and abrupt changes in policy priorities solely for the sake of political convenience, it is a sign that something has gone terribly awry.

The author is a veteran Israeli writer and translator.


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