The closer we get to elections, the more our politicians try to prove how good they are. From morning to night, they're busy thinking up creative ways "to do something good for the people," so that when election time comes they won't be forgotten, heaven forbid. This desire to be a modern-day Robin Hood is even true about politicians considered serious, like Energy and Water Minister Uzi Landau.
A few months ago, when high gasoline prices were in the headlines, Landau proposed lowering tax on gasoline by 30 percent to NIS 5 per liter. Is there a better minister than that? Who doesn't want to drive cheaply? But from where will the billions come that will be lacking in the state coffers, and what will happen to stability when the deficit grows? None of these trifles bothered Landau. He merely wanted the people's love.
A few days ago, Landau made another suggestion, no less populist than the first - to calculate our electricity bills in a new way. He proposed that we fix a consumption level for each person, for which a relatively low rate would be charged, and charge a higher rate for anything above that, based on each consumer's income. If your declared income is low or medium, you pay only a little, while if your income is high, you pay more. Since the number of "medium" earners is much larger than the number of "rich" people, the public would love the arrangement, and the political gain is clear.
The only problem is that this is a bad and complicated way to collect fees, one that would harm the economy. Any economist knows that the moment you interfere with a product's price by subsidizing it, you allocate resources inefficiently. When you give someone electricity below the marginal cost of production, you create excess electricity consumption, and therefore waste.
Any economist knows that an attempt to help the weak by subsidizing a product is the worst way to help. You'll never know who got the cheap electricity and how much you actually helped him. The size of the gift is dependent on the consumption level and personal tastes. In addition, "help" of this kind is not expressed in the economy's inequality index, which is measured based on income; it will not have changed at all. So even though the public will have received a "gift" in the form of subsidized electricity, inequality in the economy will not improve in any way.
Landau's proposal has another distorted aspect: the reliability of income tax data. After all, we all know there's no reliable database that combines a whole family's income. Also, we know that many people don't report their income honestly to the tax authorities. Many self-employed people hide part of their income, and in two communities - the ultra-Orthodox and the Arabs - a black economy thrives and income-tax declarations are very far from the truth, if declarations are made at all.
If this is the case, what does the energy and water minister want? Does he want people who evade tax and exploit the country to get another gift from it?
Landau's approach also has the unpleasant odor of paternalism. Everyone has different wants and tastes. One person wants cheaper electricity, another prefers to buy his son a computer, or furniture, or maybe a subscription to the theater, or to go on vacation. So we mustn't accept the paternalistic approach of a minister who's trying to decide what the people must consume if they want to enjoy a subsidy.
That is, it's wrong to subsidize a product. The right way to help a weak community is to give it direct financial assistance. To that end, income tax must be lowered for low earners, negative-income-tax payments must be increased, and the stipends that ensure a minimum income must be improved. That way, weak citizens can take the extra money and do with it what they want.
The only problem with that system is that it doesn't let Landau become the new Robin Hood.
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