In an interview Prime Minister Benjamin Netanyahu granted to TheMarker in April, he summarized his tax policy with an ice-pop analogy. "You can sell a lot more ice pops at a cheaper price," he said. "Along the same lines, a lower tax rate can yield far greater tax revenue." And to prove his theory, he added: "What happens with free education? How is that possible? Because the state can provide social services not by penalizing the private sector and raising taxes but by lowering the tax rate and increasing tax revenue."
Indeed, the recent law requiring free education for children from age 3 is the most significant accomplishment of the social-justice protest. The law benefits some of the most vulnerable segments of the population, including Israeli Arabs. But in order to fund it, Netanyahu decided that instead of directly taxing the rich, he will impose budget cuts that primarily affect the weakest members of society. It turns out that Netanyahu's ice pops are refreshing only for the private sector. They melt on the way to those who need them most, who are left with only the Popsicle stick, in the form of budget cuts.
The ice-pop analogy is an interesting one. For why should the owner of the convenience store - in this case, the government - sell 100 for NIS 10 each when he can sell 1,000 for NIS 8 each? As Netanyahu said, profit will rise as the price drops. Moreover, it seems reasonable to assume that retailers who buy the cheaper ice pops - in other words, those who enjoy the lower tax rates - will sell their wares cheaper.
But that logic melts away under the heat of the Middle Eastern sun, where Israeli tycoons charge more for the same products in their own country than they do outside it. The classic Israeli peanut-flavored snack Bamba, for instance, cost the equivalent of NIS 1.39 in London before last summer's social-justice protests; in Israel, the land of Bamba, it cost NIS 2.79. And basic staples are not reasonably priced either. During the same period, residents of the Galilee town of Yafia were paying NIS 7.45 for a container of cottage cheese, while Londoners were paying NIS 3.33.
Under ice-pop logic, lower tax rates should increase the number of consumers in the private sector. But what actually happens is that the same well-heeled families - nowadays they are collectively called "the tycoons" - continue to control the economy, almost exclusively. Not only has the welfare state collapsed, but so has competition. And just as in three-card monte, where you shuffle the cards a thousand times until the end and then suddenly find yourself facing the same card thanks to a brilliant sleight of hand, so too with the business dynasties. You see the same photographs of the same tycoons, and their descendants, peering out from the pages of the newspapers and from the television screen over and over again.
About a decade ago, Netanyahu used a different analogy to describe the private sector: that of a skinny man carrying the fat man of the public sector on its back. In my mind's eye, I saw the pathetic capitalists as starving Africans who would collapse if they didn't get a glucose infusion immediately. Since then, Israeli tycoons have been receiving those infusions every other day: debts erased here, a haircut there, all while grabbing control of national treasures at bargain prices.
Ten years later, I'm still having nightmares. What will happen if these tycoons decide to leave the country? Who will schlep the public sector? The nightmares subsided when Communications Minister Moshe Kahlon took the air out of the monopolies' cables, er, tires. All of a sudden the price of cellular air time was touching the floor.
After thinking deeply about this matter, I propose, in light of his dizzying success, that Kahlon be given responsibility over the tycoon portfolio, so that he will be able to put them in their place. Then, maybe, we will finally get those cheap ice pops.
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