Happy new tax! Price and tax hikes set in

Yacimovich, Lapid and Livni attack Netanyahu government for increasing tax burden on middle class.

PM Netanyahu, Finance Minister Steinitz 370 (photo credit: Sebastian Scheiner/Reuters)
PM Netanyahu, Finance Minister Steinitz 370
(photo credit: Sebastian Scheiner/Reuters)
The new year may promise a fresh start, but it may not have gotten off on the right foot for consumers: A rise in utility prices went into effect Tuesday, and middle-to-high-income earners saw their income tax bills go up as part of a series of planned tax hikes.
As party-goers kissed 2012 goodbye, water prices rose by 3.5 percent, and municipal tax (arnona) inched up 2.3%. If that were not enough, electricity prices rose a scheduled 4.4% and are expected to increase still more in the year ahead.
Nurit Felter-Eitan, spokeswoman for the Public Utility Authority, said the high electricity demand this past summer and decreasing natural gas supplies are expected to result in a decision to increase prices further in April. She dismissed as speculation media reports that the increase would be as high as 16%.
Since September, consumers have also contended with a value-added tax increase from 16% to 17%.
But even those who can more easily stomach price increases saw bigger threats to their pocketbooks starting in the new year.
In August, the government approved a series of austerity measures and tax increases to bring the ballooning deficit down to a 3% target. The package included an increase of one percentage point in income tax for the two tax brackets between NIS 14,000-41,830 per month, and a two-percentage-point increase for income above NIS 67,667 per month.
In 2013, people making NIS 14,000-20,000 a month will pay 31% in income taxes instead of 30% as they did in 2012, while those making NIS 20,000-41,830 will pay 34% instead of the previous 33%.
The bracket above NIS 41,830 will remain stable at 48%, but an additional 2% surtax has been levied on all annual income over NIS 800,000, excluding income from taxexempt home sales. Employer contributions to the National Insurance Institute for all workers who earn over 60% of the average salary rose to 6.5% from 5.9%.
The working poor, however, got a break.
“Negative income tax,” which provides a supplement for the working poor, increased 150% for all working mothers and single working fathers.
With the 2013 budget slated to be the first political hurdle following the January 22 election, further fiscal gloom is lurking just around the bend.
Already, spending projections are some NIS 14 billion over legal targets, meaning they will have to be cut, and Bank of Israel Gov. Stanley Fischer warned last week that once those were worked out, additional tax increases might be necessary to keep the deficit in check.
Labor leader Shelly Yacimovich took the government to task for bringing “bad news” in the form of higher prices on water, electricity and other products.
“What we’re seeing today is just a promo for what we can expect the day after Netanyahu is reelected,” Yacimovich said at a press conference in Tel Aviv, adding that her party would “offer an economic alternative, a detailed plan that can increase families’ net income.”
The Labor leader pointed out that Netanyahu had promised before the 2009 election to lower taxes by 20%.
He did so, she said, but for the wealthy and not the average citizen.
“Netanyahu increased the tax burden on the middle class. We won’t raise taxes for the middle class – we will lower them through graduated VAT. We won’t hurt small and medium- sized businesses, but give moral and economic responses to fill the [budgetary] hole that Netanyahu created,” she said.
Yesh Atid leader Yair Lapid, meanwhile, said the tax hike would make the middle class “explode.”
“The Netanyahu government is continuing to trample the middle class and put it in an intolerable situation,” he remarked.
He called for the government to cut funding to settlements and haredim to fill gaps in the budget, rather than “put its hand time and again in the pocket of the middle class.”
Tzipi Livni, leader of The Tzipi Livni Party, said the Netanyahu government was “spitting in the face of the public and ignoring Israeli citizens.”
According to Livni, the government should lower indirect taxes and cancel high VAT, rather than charge high taxes and use them on settlements.
“This government’s order of priorities is defective, lacking in values and not Zionist,” she stated.
“Instead of rewarding good Israeli citizens who serve in the army and reserves and pay taxes, for four years this government cared only about those who don’t contribute to society or the economy out of narrow political interests.”
Amir Peretz, third on The Tzipi Livni Party list, said the government was trying to trick the public before the elections, and that the rise in prices would continue after the “major decrees” planned by Netanyahu.
“This is a disconnected government that harms citizens’ ability to earn a living with dignity,” he added.