Trajtenberg: NIS 60 billion allocated for social justice

Committee charged with finding solutions to growing cost of living releases final recommendations to gov't.

September 26, 2011 17:18
Prof. Trajtenberg hands recommendations to PM Neta

Prof. Trajtenberg hands recommendations to PM Netanyahu [file]. (photo credit: GPO)

The Trajtenberg Committee for Socioeconomic Change presented its recommendations to the government and the public on Monday, outlining NIS 60 billion in budget allocations to address grievances raised by months of nationwide demonstrations for “social justice.”

Speaking at a press conference immediately after handing the report to Prime Minister Binyamin Netanyahu, Prof. Manuel Trajtenberg said the committee worked around the clock for 50 days to complete what he called a “seemingly impossible task.”

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He said the report would not solve all of Israeli society’s problems, but that it would “cast strong foundations through which a fairer and more just society will flourish.”

Trajtenberg identified three main reasons for the protest movement’s rise, beginning with an acknowledgement of the economic hardships faced by the middle class. He also mentioned the feeling of injustice felt by citizens, especially in sectors of the population that do not carry their own socioeconomic weight. Lastly, he said Israelis feel disconnected from government institutions and believe they are powerless to affect their future.

After pausing for a minute to allow security personnel to evict protesters who burst into the hall shouting for his resignation, Trajtenberg said he and the other members of his 14- person committee were presenting their findings because they “believe the shout [of the protesters] is legitimate.”

The 267-page report outlined, as expected, a raft of changes in four areas: housing, social services, competition and the cost of living and taxation.

In its summary, the report recommended allocating NIS 30 billion over the next five years toward achieving socioeconomic change, the lion’s share of which will go toward education.

“In 2012, more than NIS 4 billion will be allocated toward these goals, and the amount will increase over the next five years,” the report said. It added that this will be funded by budget cuts in other areas, particularly to defense spending, which will drop by NIS 2.5 billion in 2012.

The report said another NIS 30 billion would be allocated to the public through the reduction of indirect taxes and the granting of tax credits. This, the report said, brings the total five-year budget allocation to NIS 60 billion.

These changes “will be manifested by a reduction in prices and relief in the cost of living, better accessibility of public services, significant relief in education payments, increased net income because of tax credits and more,” the report said.

On housing, the report recommended:

“A) A significant long-term increase in housing supply by expanding long-term supply through a mix of changes, in order to return housing prices to a reasonable level;

B) To pro-actively develop housing for long-term rent, especially of small apartments in the high-demand areas of central Israel;

C) To offer more temporary solutions for affordable housing for struggling families, including increased rental aid for senior citizens and those eligible for public housing;

D) To kick-start the formulation of an all-inclusive strategy for the development of our urban environment, including the acceleration of programs to strengthen our cities, comprehensive construction for a varied population, acceleration of urban renewal programs and development of modern systems of public transport.

On competition and the cost of living, the report summarized:

“The cost of living is especially high in Israel when it comes to a long line of goods and services, in particular housing, housekeeping, education, health, food and transport.

Regarding some of these components, the rise in the cost of living reflects the state’s lack of responsibility when it comes to public services and/or the failures of regulation. Some other components reflect the increased powers of dominant firms in their respective industries.

“The committee recommends strengthening the government’s ability to deal with market forces through – among other things – structural changes to the laws governing the Israel Antitrust Authority, to strengthen consumer power as a counterweight, and to deal in a focused and intensive manner with a number of industries in which monopolistic forces have entrenched themselves. The committee also recommends determining new rules for state regulatory bodies, so that worrying about the cost of living becomes a major commitment for them.

“Other sources of the high cost of living are the many barriers which prevent importation and foreign competition in local markets.

For this reason, the committee recommends reducing all the tariffs that remained untouched by [a previous program], and even to set them all to zero, over two supervised periods, before the end of 2012. The committee also recommends lowering purchase taxes and increasing the permitted value of tax-exempt Internet purchases from abroad.”

On social services, the committee said that it focused mainly on early-childhood education, because of the importance it plays in a child’s development, and because it is the main tool for ensuring equal opportunities and a reduction in social disparities.

“The committee recommends expanding state and institutional involvement in education for ages 0-3, complete implementation of the law of compulsory education for ages 3-4, and the nationwide deployment of after-hours educational care for ages 3-9. The committee also recommends lowering parents’ costs, and relief on book purchases.

“Also on social services, the committee recommends a raft of changes on providing accessibility to public transport. Likewise, the committee recommends steps to remove barriers to employment, in particular to enable the integration of Arab women and haredi men into the workforce.”

On taxation, the committee recommended what it called “groundbreaking changes” to the progressive tax system:

“A) The cancellation of the planned continuation of direct tax reductions;

B) Creation of an additional tax bracket of 48% for earnings of more than NIS 40,000 per month;

C) Collection of an additional 2% tax on capital earnings and from earnings of more than NIS 1 million per year;

 D) An increase in the capital gains tax to 25% (30% for controlling shareholders);

E) An increase in the companies tax to 25% in 2012, with the option of raising it to 26% in the future;

F) Cancellation of the planned increase in the gasoline excise;

G) A grant of two extra tax credit points to fathers of children aged 0-3.”

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