The price of popularity

Yishai decided to boost his popularity by making property tax cuts, but local authorities will be stuck footing the bill.

By JPOST EDITORIAL
Eli Yishai 311 (photo credit: Marc Israel Sellem)
Eli Yishai 311
(photo credit: Marc Israel Sellem)
People do not like to pay taxes. Relieving them of this burdensome obligation is, therefore, an easy way to their hearts.
Politicians understand this. Around election time they tend to remind constituents of the favor bestowed upon them.
Judging from last summer’s socioeconomic demonstrations, which placed our unreasonably high cost of living at the center of public scrutiny, citizens’ sensitivity to high taxes has never been higher. This might explain Interior Minister Eli Yishai’s decision at the end of December to accept recommendations by the Kehat Commission and provide discounts and exemptions on municipal taxes to students, reserve soldiers, the handicapped, institutions and families with children under the age of five.
Unfortunately, local authorities – some of which have been in a state of near insolvency for over a decade – will foot the bill. These latest discounts and exemptions come after previous interior ministers, who like Yishai grasped the connection between tax cuts and popularity, put in place discounts and exemptions of their own amounting to NIS 2 billion, or 7.5 percent of local authorities’ revenues from property tax, or arnona.
According to Shlomo Bohbut, chairman of the Union of Local Authorities, Yishai’s new cuts will reduce revenues by another NIS 1b.
Not surprisingly, local authorities’ garbage collectors, preschool teachers’ assistants, traffic police and other employees have called a strike rightly fearing that Yishai’s generosity will come at the expense of their monthly paycheck. (There have been periods in the recent past when some local authority employees have gone unpaid for months). And even the strongest local authorities – such as Tel Aviv and Ra’anana – or settlements in Judea and Samaria – such as Beit El that are poor but have a strong ethic of paying taxes – are joining forces with Arab and haredi local authorities, which are the poorest because in many cases only a fraction of residents, who already receive exemptions of up to 90%, do not pay.
The reason for the across-the-board opposition, according to Prof. Eran Razin, of the Hebrew University’s Department of Geography, an expert in the workings of the local authorities, is that the latest exemptions and cuts in arnona taxes are simply unreasonable. For instance, one proposal would make it exceedingly easier for any nonprofit organization that advances a religious, cultural, scientific, health or welfare cause to receive a 66% discount in property tax. Critically, this discount would apply going back three years. Nowhere is it explained precisely where the local authorities will find the money to provide this retroactive discount.
Another proposal, suggested by the Justice Ministry, would clamp severe limitations on donations made by private individuals to the municipalities, to prevent corruption.
If municipalities were receiving enough money from the state, a coherent argument could be made in favor of more stringent monitoring of donations. However, with the state cutting to a minimum its transfers to local government, municipalities have no choice but to pursue other sources of revenue such as donations. And while there is a danger that municipalities that receive large donations would give the donors preferential treatment, at least the proceeds from such arrangements benefit the wider public and are not pocketed by individuals.
Local authorities are being stifled by other Interior Ministry reforms, such as a move aimed at alleviating the housing crisis. Known as the “house dividing law,” this building ordinance would allow existing apartments to be split into smaller flats and rented or sold individually.
However, the increased population density would lead to adverse side effects such as the overcrowding of schools, parks and other public and municipal services originally planned for smaller populations. And a recent Supreme Court decision will make it harder for mayors to sign deals with business developers, further dampening potential property tax revenue and local economic activities.
Aware of voters’ aversion to taxes, Yishai has decided to boost his popularity by making property tax cuts worth millions of shekels. Unfortunately, local authorities will be the ones forced to foot the bill for these populist measures.
It is perfectly honorable for Yishai to want to help students, reserve soldiers, the handicapped and families with children under the age of five. But the state, not embattled local governments, should pay the price.