Socioeconomics

Barring major security flare-up or air strike on Iran, economic issues emerging as major focus of next elections.

By
April 1, 2012 22:43
3 minute read.
Social justice protest in Tel Aviv

Social Justice protest 311. (photo credit: Israel Police)

Barring a major security flare-up – or an air strike on Iran – that will eclipse all other concerns, economic issues are shaping up to be a major focus of citizens’ concerns ahead of next year’s elections.

Just days after trouncing MK Tzipi Livni in the Kadima primary race, MK Shaul Mofaz began making his influence and socioeconomic priorities heard, calling on Kadima MKs to take part in Saturday night’s small Tel Aviv march against the rising cost of living.

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Seen as a precursor to massive grassroots protests this coming summer that will attempt to recreate the energy and critical mass of last summer’s demonstrations, Saturday night’s march coincided with yet another hike in gas prices.

Prime Minister Binyamin Netanyahu, acutely aware of the potential for a populist backlash resulting from such a move – which would immediately translate into higher prices for consumers as both electricity and transportation costs skyrocketed together with gas prices – intervened at the last minute to limit the size of the price hike to just 5 agorot per liter instead of the planned 20 agorot per liter. The haste with which he intervened gave the distinct impression that Netanyahu was nervously caving in to popular pressure, instead of being governed by rational considerations.

Undoubtedly, gas prices are high in Israel. Since January 2009, the price of 95-octane gas climbed from NIS 4.75 per liter to NIS 7.79 per liter. The doubling of crude oil prices accounts for most of the rise. But this still does not explain why a gallon of gas costs $8.16 here and about half that price in the US.

Israelis, like Europeans, pay a high excise tax. In Israel it is NIS 2.96 per liter, 19.1 percent more than three years ago. And we also pay a 16% value-added-tax not just on the gas we buy but also on the excise tax.

The rationale behind the tax is to discourage people from using their cars, thus reducing pollution and the accompanying societal costs caused by pollution. When we drive our cars we cause indirect damage to others in the form of lung cancer, vascular infections and in general a higher propensity for sickness. The state has to step in to provide citizens with compensation in the form of higher health care expenditures. And when sick people miss work, productivity is also negatively affected.

Therefore, policy makers in Europe and in Israel reason, the state has the right to raise fuel taxes to either pay for these added costs or to dissuade drivers from causing them in the first place.

However, unlike countries like Italy, Germany and Norway, in Israel we are also forced to pay an exorbitantly high purchase tax on new cars. According to the Jerusalem Institute of Market Studies, various taxes that we pay when we buy a new car amount to between 113% and 128%, five times higher than most European countries. The high purchase tax on cars actually has a negative effect on pollution since it tends to discourage people from buying new, more fuel efficient and greener cars.

Also, the high purchase tax has created a situation in which Israelis have relatively fewer cars than Europeans – not to mention Americans. If in the US there were 808 cars per 1,000 people in 2009, according to World Bank figures, and in most western European countries there were more than 500, in Israel there were just over 300, about the same as Hungary and Argentina.

But unlike many European countries, Israel has yet to develop an efficient public transportation system, though significant steps in the right direction have been made.

Our politicians are beginning to understand that socioeconomic issues – the price of gas, the price of a new car and efficient public transportation – can decide the next elections. The Iranian nuclear threat and the security challenges of combating Iran’s proxies on our borders – Hezbollah in the North and Hamas in the South – are not going away.

But when single mothers work 12 hour days and still can’t feed their families, when the so-called “middle-class” struggles to maintain a subsistence-level existence, even the potential existential threats presented by Palestinian terrorists, by Kassam and Grad rockets, or by an Islamic Republic with nuclear capability can pale in comparison to the immediate existential threat of failing to make ends meet.


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