After weeks of leaked information, the Israeli public finally got a look at Finance Minister Yair Lapid’s actual proposed budget and there was widespread if not unexpected anger.
The budget calls for an increase in income taxes by 1.5% starting in 2014 and an increase in 2013 spending by 7%, the largest budget increase of all the OECD countries.
However, since that amount was still lower than initial spending projections, the budget draft declared it was presenting “the largest cuts in the country’s history.”
Many of the measures will hurt average working people and the poor. Value Added Tax will rise 1% to 18%, added taxes on cigarettes and alcohol, and new housing taxes. Lapid also seeks to remove the exemption from national insurance and health insurance payments for housewives.
Child allowance will be cut to 104 shekels per month for each child, and the free child dental care program introduced several years ago by former Deputy Health Minister Rabbi Yaakov Litzman will be rolled back.
The defense budget was targeted for NIS 4b cut; infrastructure projects will be deferred; five Israeli missions overseas will be closed, overseas trips by ministers will be trimmed, and several magistrate courts will be closed.
Opposition leader Shelly Yacimovich (Labor) lashed out: “This is a program of depression and blows, not a program of growth. The budget hole was created because nobody dared touched the most significant collection sources — big capital — and because the cuts and cost of living eroded salaries and hit the middle class and poor hard, they stopped consuming,” she said.
Yacimovich pulled out a sketch of a ticking bomb to illustrate her declaration that Lapid had crossed her red lines on budgetary matters. It parodied Lapid’s use of such a drawing, like the one Prime Minister Binyamin Netanyahu had used in his U.N. speech, saying it was the red line of the middle class, and that any taxes increases would make the bomb explode.
National Insurance Institute (NII) Director Prof. Shlomo Mor Yosef warned on Tuesday that proposed cuts will have a devastating effect on the most vulnerable sectors.
“More than 40,000 families will be pushed under the poverty line, and many poor families will become poorer,” he told Ynet.
“The families below the poverty line barely survive as it is. With the planned cuts in child benefits, the increase in value added tax and the removal of other social services, like dental treatments and subsidized daycare, these families won’t survive,” he said.
In a Knesset Economics Committee meeting, Tourism Minister Uzi Landau decried the planned cancellation of the exemption of tourist industries from VAT.
“Tourism employs 200,000 people,” he said. “Over 80% of tourism is incoming tourism, meaning that this is an export industry. There are investments of 2 billion shekels in the pipeline, and if tourism is harmed, they will go to waste. We can jump from 3.5 million tourists per year to 5 million within two years if we do the right thing.”
Lapid, characteristically, responded to critics in an online message: “Yes. It’s hard. We knew it would be hard, but it’s not the same thing when it actually arrives. It’s hard and people are angry, but this is exactly what taking responsibility means: doing what’s hard with the clear knowledge that people will be mad at you.”
The alternative, he said, was allowing the economy to “collapse” and letting the deficit continue to grow.