Nothing Will Satisfy Israel's Social Protest Leaders

Prime Minister Netanyahu's religion has always been lowering taxes, how could he suddenly support raising them? For Israel's protest leaders, this is nothing but sleight of hand.

If someone had told me two months ago that Prime Minister Benjamin Netanyahu was going to pass a cabinet resolution to increase income tax, increase corporate tax and impose higher capital gains tax, I would have laughed dismissively and said it was impossible.

After all, that's like an idol in the temple of Netanyahu. It's basically converting to a different religion, because Netanyahu's religion all these years has been lowering taxes. How could he suddenly support raising them?

But the leaders of this year's social protest are not impressed even by this surprising turnabout. Sure, they demanded that direct taxes be raised for those who could pay them and indirect taxes be lowered for the low and middle classes. But now that the Trajtenberg committee examining the country's cost of living has recommended just that and the cabinet adopted the proposal, the protesters are once again angry and dissatisfied. "It's nothing," they say.

The truth is that nothing will satisfy them. They fell in love with protest and got drunk on the power it gives them. Daphni Leef treats Netanyahu with overt contempt and gives him an ultimatum: "Bibi, this is the last time I'm going to you directly." Then she says: "We're great citizens, and all the prime ministers, ministers and [Bank of Israel] governors are scaredy-cats." If so, what do the great ones care what the scaredy-cat does?

In 2003, when Netanyahu was finance minister in the Sharon government, he initiated a process that included lowering taxes and reducing the budget in an effort to accelerate growth. In that program, marginal income tax was reduced from 51 percent to the current 45 percent, and corporate tax was reduced from 36 percent to the current 24 percent. These are some of the steps that extricated the economy from deep recession and put it on the path to rapid growth. As a result, unemployment dropped from 11 percent to 6 percent - clearly a victory for social welfare.

And now, within a scant 50 days since the Trajtenberg committee was formed, everything has been turned on its head. Instead of continuing to lower marginal income tax - say, a gradual decrease from 45 percent to 39 percent, as the prime minister had planned until two months ago - Netanyahu is increasing marginal income tax to 48 percent and is even imposing a 2 percent "rich tax" on anyone who earns more than NIS 83,000 a month. In other words, the marginal tax rate will rise to 50 percent for that bracket. Netanyahu is also raising corporate tax to 25 percent instead of continuing to lower it gradually to 18 percent, as he had planned until two months ago.

And if that's not enough, Netanyahu is also raising capital gains tax from dividends and the sale of stock and inflation-linked bonds from 20 percent to 25 percent. Controlling shareholders will pay even more: 30 percent of the dividends they receive. But for Leef and her friends, all that is nothing.

On the other side of the equation, the cabinet decided this week to lower a long list of indirect taxes in an effort to accede to the protesters' main demand: lowering the cost of living. This includes a cancellation of the planned 40-agorot increase in the excise tax on gasoline and giving fathers a two-point income tax deduction for every child under 3, meant to improve the income of young working parents. And then there's the main change: a gradual reduction of customs duties and sales tax on imported goods, meant to lower Israel's ridiculously high prices.

The high cost of living was the driving force behind the wave of social protest. It started with a protest against gas prices in January and expanded to a battle against overpriced cottage cheese. Only later did it expand to encompass housing and the country's overall social welfare policies. So we would do well to welcome the lowered customs duties on various manufactured goods, which will decrease gradually over four to six years until they are abolished, and to welcome the lowered sales tax on electronic goods.

Yes, the customs duties should have been canceled within a few months, not a few years, and the high customs duties on imported foods should also have been lowered. Still, a step is being taken in the right direction - a step that will lead to lower prices, increased consumer power and a greater supply of varied products.

But for the protest leaders, all this is nothing but sleight of hand. It's nothing much.