Hundreds of thousands of Israelis took to the streets a year ago to protest the
economic burdens borne by the middle class. Since then almost all their taxes
have gone up, or are about to go up. In 2012, Tax Freedom Day, which measures
how many days’ worth of an average year’s salary goes to the government, reached
a sorrowful 192 days, 11 days more than last year.
An even sorrier fact
is that the opposition to the current government wants to raise taxes even more.
Most of the politicians and parties have agendas that are based on taking as
much as they can from taxpayers, borrowing even more, and redistributing the
money to individuals and corporations who have not earned it. With higher taxes
and more government regulation, economic activity slows, investment drops and
those who try to run small businesses or support their families become
angrier.
Here is an economic agenda for any politician looking to
represent the millions of taxpayers who have no voice in the Knesset, the
400,000 businesses struggling with over-regulation and over-taxation, and the
Israeli people – all of whom, poor as well as wealthy – stand to gain if Israel
grows economically, attracts foreign investment and makes the lives of its
citizens easier.
A sound economic agenda must begin with a willingness to
recognize the facts: the government limits the supply of land for housing and
levies taxes amounting to over 30 percent of the cost of a new apartment;
prevents local competition or imports in many food industries; subsidizes
corporate pyramids owned by a few families and businessmen; is responsible for
the centralized banking sector; and has run the educational system into the
ground.
The fastest growing sector of the economy is the government’s own
cabinet, which houses some three dozen ministers and deputy ministers. These
have been the choices of most right-wing and left-wing governments and religious
and secular parties over the years.
While this may sound pessimistic, it
would be worthwhile to remember Robert Kennedy’s citation of George Bernard
Shaw, who noted that while some see things as they are and ask, “Why?” others
dream of things that haven’t been and ask, “Why not?” Good economics and good
politics would suggest the following:
• Housing: Instead of limiting supply,
taxing demand and subsidizing everyone, sell state-owned land and cut taxes and
there will be no need to subsidize anyone. Sell or give public housing to its
residents. Pass a law requiring municipalities to approve acceptable
construction requests in three weeks.
• Municipalities: The government
needs to reverse its law linking property tax hikes to municipal salaries, which
encourages outlandish salaries. Municipalities that cannot meet their payrolls
should outsource services such as waste collection, which others can provide
more efficiently and at a lower cost.
• Education: There is no point in
forcing parents to send three-year-olds to state nurseries, putting private
nurseries out of business and getting younger children into a failing system.
The government should give its education budget not to a bloated ministry to
mismanage, but to all parents of school-age children in the form of vouchers.
Parents should choose any school they want and pay with these
vouchers.
Schools would immediately become responsive to parents and
children and competition for students would lead to improved education.
•
Taxes: Income does not belong to the government which wants to redistribute it
but to the employee who earned it. A tax system should be simple and fair.
Combine all income taxes as well as the corporate tax and set one rate,
approximately 25%, for all income above a set minimum. Individuals and
businesses would be able to file their taxes on a form the size of a
postcard.
• Monopolies: Stop awarding import permits or tariff discounts
to local food monopolies. Allow Internet banking.
Cancel the Law for the
Encouragement of Capital Investment and close the Office of the Chief Scientist,
which award billions of shekels to a few hundred chosen corporations; instead
lower taxes for all businesses.
Demand that port workers, who received
raises on the condition they agree to reforms and not strike, return the raises
because they have struck and have prevented any serious reform.
End
taxpayer funding of so-called “Green electricity,” which has raised the cost of
electricity for the whole country while not approaching the color
green.
Stop subsidizing private electricity production and stop forcing
producers to sell to the state electric monopoly; license anyone who wishes to
produce electricity for their own use or sale.
• Free trade: Tariffs and
non-tariff barriers to imports are imposed by politicians and ministries open to
lobbying and pressure. Israel should abide by the treaties it has signed and
allow free trade; charges of “dumping” should be examined by an independent
commission trained to ask only two questions: are foreign products being
“dumped” in Israel and what, if any, is the economic damage?
• Big government:
In Israel, 35 ministers and deputies serve a mere 7 million people. The
appointment of over 30 of the 120 Knesset members to the government has left the
Knesset and its committees short-staffed and unable to function. The cabinet
should be limited to 15 ministers, all of whom should be professional
appointees, not politicians.
If parties insist on being in the cabinet,
each party should be limited to one political representative.
Perhaps
some politicians think voters want to hear how much money a candidate will give
them. While bribes are never a good idea, voters more probably understand that
they will be asked to pay for these handouts, and they would prefer their own
independence and economic well being, which they know are tied to Israel’s
strength and economic health. They may be looking for a candidate who will ask,
“Why not?”
The writer directs the Public Policy Center at the Jerusalem
Institute for Market Studies.