Israel Matzav

Massive entitlement slash for Haredim, massive tax increase to help keep socialism running

Just when you thought that Israel could not get any more incompetent than having a finance minister who is a former television host who admits that he knows nothing about economics, Yair Lapid actually gets to implement his policies. After announcing last week that he is increasing spending on the socialist enterprise to make sure the Haredim fall further behind economically, he's now announcing that he's increasing taxes because that increased spending has to be paid for.

Finance Minister Yair Lapid’s draft budget will increase income taxes by 1.5% starting in 2014 and boost 2013 spending by 7% in real terms, the largest budget increase of all the OECD countries.
  
The draft budget, released Monday, took extraordinary measures to allow greater spending and a large deficit in 2013 due to its late passage and “the resultant limited ability of the government to make necessary adjustments to spending and revenue,” but pegged 2014 as a year for the return to fiscal responsibility.

For the 2013 budget, Lapid set the deficit limit at 4.65% of GDP, and stretched the allowed growth over the previous year (NIS 9.5b) by an additional one-time 2.2% splurge (NIS 6.5b), which alongside an increase in prices (NIS 3.8b.) brought the overall budget to NIS 304.5b. In real terms, that growth amounts to a 7% increase over 2012, the highest in Israel in the past decade and among all OECD countries for this year.

At the same time, Value Added Tax (VAT) will increase one percent to 18%. The 2013 budget also reduces exemptions, simplifies the tax mechanism for retirement savings, adds taxes on cigarettes and alcohol and installs new housing taxes.

Reintroducing “fiscal restraint” with a 3% deficit in 2014, however, required further tax hikes.
That year, income taxes will increase 1.5% across the board, bringing the highest rate to 49.5%. Corporate taxes will also increase one percent to 26%.

What you all don't realize is that the 49.5% rate kicks in at about $4,000 per month, which makes us one of the highest taxed countries in the world. And that's without counting Bituach Leumi (like social security but a lot more people get paid small amounts) and the health tax (for our socialized health care). For once I find myself agreeing with Shelly Yacimovitch.

Opposition leader Shelly Yacimovich on Tuesday criticized Lapid for the draft budget, saying the proposed cuts represent "cruelty, backstabbing the public and mainly a bitter economic mistake which does not bring a single shred of good news."

The Labor leader called the plan one of "depression and hard hits and not a growth plan."

She stated that Lapid was continuing the mistake which had led to the budget deficit, failing to sufficiently tax "big capital."

Yacimovich slammed Lapid for contradicting his campaign rhetoric which slammed "the old politicians" for raising taxes on the middle class.

The biggest companies in the country pay almost no taxes because the government is 'afraid they'll leave,' so instead we have a brain drain of high tech geniuses moving abroad. 

Labels: Israeli economy, Shelly Yacimovich, Yair Lapid

posted by Carl in Jerusalem @ 2:01 PM