Man with luxury car Mercedes 311.
(photo credit: Thinkstock/Imagebank)
Last week, I wrote about how the “so-called” middleclass tax cut is going to
cause damage to both the Israeli economy as well as to those in the lower and
middle classes. Now it seems like the Finance Ministry, led by Yuval Steinitz,
is trying to outdo itself by dramatically increasing the taxes on luxury cars
My gut tells me that this is only the beginning as more
and more Trajtenberg committee recommendations are enacted. Measures to
disincentivize job-creators, as well as those trying to climb the socioeconomic
ladder, is sure to backfire by stifling capital investment and adding to the
The ultra-rich like Nochi Dankner and Shari Arison
will be able to use their battery of accountants and lawyers to figure out ways
to shelter their money. It’s the small and mid-sized business owners that just
saw their corporate taxes increase. If they are fortunate enough to make a
profit, the money that they take out of their businesses as a dividend will be
taxed at a higher rate as well.
Redistributing wealth from the rich to
the less fortunate doesn’t really help the less fortunate. What helps them the
most is a job and incentives to invest, so that they can be enabled to do what
it takes to grow their net worth and exit the poverty cycle they are relegated
to. If Daphni Leef and her protesters have their way, those in lower income
levels have little chance of ever escaping their current economic conditions. No
society has ever been taxed into prosperity.
Required Reading Before any
more damage is done, I urge the local policymakers to read the defense of
capitalism penned by former Florida governor Jeb Bush, the brother of former
president George W. Bush, which was published in a recent Wall Street Journal
editorial titled “Capitalism and the Right to Rise.”
In lamenting the
current state of economic freedoms, he writes, “Freedom of speech, for example,
means that we put up with a lot of verbal and visual garbage in order to make
sure that individuals have the right to say what needs to be said, even when it
is inconvenient or unpopular.
We forgive the sacrifices of free speech
because we value its blessings.
“But when it comes to economic freedom,
we are less forgiving of the cycles of growth and loss, of trial and error, and
of failure and success that are part of the realities of the marketplace and
life itself. Increasingly, we have let our elected officials abridge our own
economic freedoms through the annual passage of thousands of laws and their
“We see human tragedy and we demand a regulation
to prevent it. We see a criminal fraud and we demand more laws. We see an
industry dying and we demand it be saved. Each time, we demand, ‘Do something...
anything.’” Bush hit the nail on the head. A few days ago, I got a letter (sent
in a Knesset envelope – at taxpayers’ expense) from a Knesset member who will
remain nameless. He writes about how much of an impact he has made in 2011, and
all the laws that he authored or co-authored, assuming that the sheer quantity,
by definition, has greatly added to Israeli society. Could it be that he
actually has harmed the very people he is claiming to have helped? Maybe the
best thing our elected officials could do is do nothing and stop interfering in
our quest for a better life, both individually and for society in
The right to rise This is a term started by US Congressman Paul
The point is that governments should create a landscape that breeds
success. How does this apply to Israel? Prime Minister Binyamin Netanyahu and
Finance Minister Yuval Steinitz should stop pandering to those who believe in
equality of outcome; rather, they should create a system that allows people to
be the best that they can be.
In the words of Bush, “We either can go
down the road we are on, a road where the individual is allowed to succeed only
so much before being punished with ruinous taxation, where commerce ignores
government action at its own peril and where the state decides how a massive
share of the economy’s resources should be spent. Or we can return to the road
we once knew and which has served us well: a road where individuals acting
freely and with little restraint are able to pursue fortune and prosperity as
they see fit, a road where the government’s role is not to shape the
marketplace, but to help prepare its citizens to prosper from it.”Aaron
Katsman is a licensed financial professional both in the United States and
Israel, and helps people who open investment accounts in the United States.
Securities are offered through Portfolio Resources Group, Inc. a registered
broker dealer, Member FINRA, SIPC, MSRB, SIFMA. For more information, call (02)
624-0995, visit www.aaronkatsman.com or email firstname.lastname@example.org.