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
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
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.
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
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.”
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.
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?