Lapid's New Policies Ring of Israel’s Cynical Old Politics

The finance minister’s attempt to throw sand in the eyes of the public with a selective look at his austerity program won’t work.

The afternoon hours on Thursday in newsrooms around Israel are unusually pressured. There are the weekend supplements, a lot of pages to fill, crowded schedules and a thirst for juicy headlines that will get readers’ attention over the long hours they have with their newspapers during their weekend.

In Finance Minister Yair Lapid’s office, they are well aware of the routine. After several stormy weeks where their boss has rarely, if ever, surfaced below the front pages, his aides tried to leave for the weekend in a somewhat more relaxed manner: For the first time since he took office last month they released a formal announcement about the fiscal austerity measures that he plans to impose − taxes on cars and expensive homes.

The announcement came immediately after Lapid met Prime Minister Benjamin Netanyahu to present an outline of the budget he plans to present for 2013-14. By putting out a statement, Lapid thought he could solve two problems − he would have some comfortable weekend headlines and he would assuage the public, angry at decrees, new taxes and cutbacks, with a few populist strikes at the rich.

Among all the things Lapid has done since he assumed the finance portfolio, this is by far the most cynical. After all, during that meeting with Netanyahu, Lapid also discussed significantly more important and painful measures that will hit the poor and middle class: a reduction in child allowances, an increase in the value-added tax by one percentage point, a possible move against the advanced-training funds’ tax exemption and a hike in income taxes.

All of these measures will dig deep into the pockets of the great mass of Israelis and not just the top decile of income earners who buy homes in Savyon and Kfar Shmaryahu or travel in expensive jeeps.

So if the Finance Ministry wants to put out a statement of the Lapid-Netanyahu meeting, why didn’t it report on everything that was on the agenda?

At the start of the week, Lapid got into a clash with senior treasury officials after he wrote on his Facebook page that he has no intention of raising university tuition, and in a direct appeal to students, said “I’ll do you a good turn.” In fact, afterward Lapid discovered that a proposal like this indeed had been raised in discussions inside the treasury budget division with student leaders.

Therefore, Lapid quickly had to find other places to balance the budget and came up with the idea of taxing luxury products. But how much will this initiative raise in fresh tax revenue? Somewhere on the order of NIS 300 million to NIS 400 million, depending on the mechanisms devised for collecting it. That’s a pittance by treasury standards, something like a tenth of the amount that the government can expect from a one-point rise in the VAT rate to 18%.

Sand in the public’s eyes

Taxing luxury goods is nothing more than an attempt to throw sand in the eyes of the public, and give it the impression that the wealthy are going to be first in line to swallow that nasty pottage of NIS 30 billion in spending cuts and several billion shekels more in tax increases, even though the reality is that most of it will be fed to the poor and middle class.

Lapid demanded in his election campaign, “Where is the money?” and vowed to find it. It is reasonable to assume that he has invested time learning just where it is. He also promised to “do the right thing” and to “take care of the middle class.” He also committed himself not to hurt upper-income groups either and blocked at the last minute a plan to slash tax credits for working women. He also declared that in the last few years the government has been on a drunken spending binge with the state budget.

But when all the promises and declarations are done, Lapid needs to create a program and budget in which the principal question is: From whom will I take and to whom will I give? That’s no easy challenge for someone who needs the public’s love, something that even a direct appeal via Facebook can’t finesse.

The great struggles will begin when the final list of economic decrees is presented to the public. Until then, you can take Yonatan Q. Public for a ride by letting him imagine that his obnoxious boss will have to pay higher taxes on his BMW. 

Moti Milrod