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Fall 2000
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The Director's Column
By Dr. Alvin Rabushka
Director, Division for Economic Policy Research
Absurdity in the Air: What Shohat Wants
My
intention in this column is to "raise your consciousness." There is an
absurdity in the air in Israel's economic policy; should you fail to see it,
you will miss the point of what you are reading here and elsewhere about the
Jewish state just now.
Finance
Minister Avraham "Beiga" Shohat fiddles while Jerusalem burns. On October
31, 2000, he submitted the 2001 budget to the Knesset, asking it to approve NIS
245.8 billion ($60 billion) in spending. However, he requested that the Knesset
postpone deliberations in the Finance Committee until he can garner the support
of a majority of Knesset members. And Shohat wants new taxes.
The Feeding Frenzy
The feeding frenzy began instantly. It was ugly. The military wants another $500 million, and that's just the beginning. The police want more. The religious parties want more for their religious and educational programs. Yisrael B'aliyah and Democratic Choice want a new department to deal with housing for new immigrants and settlements. Shinui wants a reduction in university fees and middle-class tax cuts. Meretz wants $500 million for special education programs and $250 million for health, welfare services, and the Israeli Arab sector. And Shohat wants new taxes.
Readers of the Quarterly may recall that my last two columns focused on the "Great Israeli Tax Grab of 2000." This grab for more money, by a government that already confiscates half of the taxpayers' income, includes new taxes on shares and savings, drastically increased tax reporting requirements, and numerous other new taxes. Shohat is determined to achieve his legacy —taxing Israel's young, successful, greedy entrepreneurs. Never mind that most Israeli high-tech firms have already relocated to the United States, Israel is falling apart, and it's not safe to attend a concert at the Jerusalem Theater. And Shohat wants new taxes.
Really,
folks, it's hard to write about the Israeli economy at the end of 2000 with a
straight face. The peace process is in tatters. Tourism has dried up. High-tech
investment conferences have been postponed. The fruits of peace have turned
rotten. And Shohat wants new taxes.
New Politics, New Taxes
I suggest a new campaign slogan for Beiga in the next election, which will likely be held next year. "Taxes for Peace." Forget "Land for Peace." That's old politics. We need a new politics. One that collects more taxes. If only Israel's multitude of political parties and factions would put aside their bickering and enact new taxes, we would finally have peace in our time. And Shohat wants new taxes.
Israel's financial daily, Globes, reported on October 6, 2000, that new capital market taxation would be postponed until at least July 2001 and perhaps until January 2002. The reason is that the chaos that represents the Israeli government and Knesset failed to approve the first reading of the tax increase bill in time to set up the tax reporting, collecting, and enforcement mechanisms. Banks and brokers must prepare for reporting to the Income Tax Commission on sales of taxable securities. The Income Tax Commission needs several months and tens of millions of dollars for computers and training to prepare for the collection of capital gains and apartment sales taxes, as well as for handling the additional tens of thousands of tax returns per year. It needs about $18 million to set up new divisions for international taxation and gift taxes, to acquire office space and hire new employees. To ice the tax cake, Shohat plans to change the width of the tax brackets "to increase the burden on the higher income brackets." And Shohat wants new taxes.
In
addition, all 120 Knesset members would like more U.S. aid. Taxes and aid, aid
and taxes. Praise the peace process and pass the hat. To get more aid, Prime
Minister Ehud Barak promoted Acting Foreign Minister Shlomo Ben-Ami to foreign
minister and dispatched him to Washington, D.C. for discussions with U.S.
officials. On the morning of November 2, 2000, Ben-Ami held a press conference
and announced, surprise of surprises, that Israel hoped the U.S. Congress would
approve another $800 million in special aid by November 14. In addition, he
remarked, he hoped to complete, soon, the formula for the gradual increase in
annual military aid to $2.4 billion. And Shohat wants new taxes.
With Apologies
On the same day, the director-general of the Prime Minister's Office offered his apology to the Arab population for past Jewish discrimination. He praised the cabinet and prime minister for its exercise of restraint in the midst of hostile Palestinian actions. And Shohat wants new taxes.
The water level of the Sea of Galilee is at its lowest level in 100 years. And Shohat wants new taxes.
Only four percent of gasoline stations in Tel Aviv meet environmental standards, while all the others let gasoline seep into the city's water system. And Shohat wants new taxes.
Edward
Said, professor of English Literature at Columbia University, recently visited
Lebanon, his birthplace. While there, he threw stones at Israeli soldiers. The
trustees of Columbia University ruled that his actions were protected under free
speech. Using Columbia's guidelines, here is my suggestion for the new U.S.
administration and Congress in its dealings with Israel. They should demand that
the Knesset immediately re-enact the original Free Processing Zones Law.
(Readers will recall our Zone initiative became law in 1994 only to be destroyed
by the government before it could be executed,
while one especially concerned cabinet minister expressed his fear that
the American Jewish investors, Mr. Tisch perhaps, was really going to use the
zone for a chicken farm. We laughed in shock until we heard that Israeli
farmers, demanding more subsidies from Mr. Shohat, protested by throwing
chickens at him.)
On the Wings of Chickens
When the zone is built, it should be leased to foreigners who will turn it into a giant chicken ranch. Then, all those who wish to help beleaguered Israeli taxpayers should descend on Israel, buy all the chickens, and, in true Israeli fashion, throw them at the finance minister. In so doing, the chicken throwers will join their Israeli brethren in the charade that masquerades as economic policy making in Israel. If enough throwers of chickens join together, perhaps Shohat will get the message that Israelis don't want new taxes.
