Debate taxes

It's high time our political system attributed more significance to domestic affairs.

money cash 88 (photo credit: )
money cash 88
(photo credit: )
Likud Chairman Binyamin Netanyahu did a service this election season when he personally introduced his party's economic platform. Suffice it to say that even veteran political analysts are at a loss to recall when, if ever, a prime ministerial contender dedicated an entire press conference, flanked by all his top associates, to domestic issues in general, and pure economics in particular. Even before one scrutinizes the substance of Netanyahu's presentation, one must concede that in a country that since its inception has seen its political discourse dominated, and often altogether taken over, by military and diplomatic issues, it is high time our political system attributed more significance and dedicated more time to domestic affairs. The choice of Amir Peretz to lead Labor, and Netanyahu to lead the Likud, offers for the first time a clash of clearly contrasting economic philosophies. Any political-economic debate boils down to three challenges: how to deliver individual prosperity, national security, and social stability. Netanyahu's plan addresses all these, albeit in what he himself surely agrees are debatable ways. To foster social stability, the former finance minister proposes to introduce a negative income tax for low wage earners (an idea that the Treasury finds impractical but the Bank of Israel supports), to lower the cost of public transportation by 30 percent, raise national insurance payments to senior citizens, and lower public-housing rentals. To promote individual prosperity, the Likud is advocating a massive tax cut, whereby the maximum marginal income tax would drop from the current 49% to 40%, value added tax would be lowered from the current 16.5% to 14%, and working women would get an additional break if they employ nannies. In addition, Netanyahu promises to lower university tuition by NIS 3,000 and raise grants for discharged soldiers. In the same vein, the Likud's economic platform also promises to expand the geographic periphery's tax breaks, and drastically cut the defense budget. It is very easy to dismiss this plan as a wishful thinker's laundry list. It isn't. While many of this plan's details can be challenged by conservatives and liberals alike, it clearly offers a coherent vision, one that is backed by Netanyahu's personal record as a finance minister who delivered on his promises. Yes, it is fair to demand of Netanyahu detailed breakdowns of just how he will finance a plan that cannot be sustained merely by cutting the defense budget. At the same time, it is unfair to say, as some already are, that the man who led a shrinking economy to a 5.2% growth rate, and lowered unemployment from 10.9% to 8.9%, is suffering from dementia. Netanyahu's economic vision is simple: help the economy grow, and this will allow a substantial shifting of finances from the state to the citizen. Labor's Amir Peretz and Shelly Yacimovich have come forward with ideas based on an opposite philosophy, such as raising the minimum wage, introducing an estate tax and restoring long-abolished import tariffs. Fortunately for Labor, its economic voice has since been taken over by Prof. Avishai Braverman, a former World Bank economist who flatly rejects many of his colleagues' ideas. The ruling party, Kadima, is keeping conveniently above this fray, assuming most voters aren't so passionate about economics, and that at any rate there is little to gain by taking sides between Netanyahu's Thatcherism, Peretz-Yacimovich's neo-socialism, and Braverman's social democracy. Acting Prime Minister Ehud Olmert says he wants to offer more "compassion," but at the same time also repeatedly praised Netanyahu for his successful reforms as finance minister. Considering the bitter rivalry between the two, Olmert did so not because he changed his views of Netanyahu, but because he understands that the mainstream public will not buy any denial of Netanyahu's accomplishments at the Treasury. Now Olmert would do well to go one step further and understand that the same public that admired Netanyahu's energetic privatizations, budget cuts and deregulations, also agrees with him that its tax burden - among the free world's highest - must be lowered. By promising a tax cut and making it a central element in his election campaign, Netanyahu has challenged his opponents to talk at least as specifically as he just has about our tax burden. Labor already has. When will Kadima?