In every day slang the phrase "going down the drain" means getting lost, wasted, squandered. Oddly enough, the phrase has its origins in a Greek saying for state coffers ¿ money that goes down the drain is money collected by the ruler or king for his own kitty.
There is some confusion between money that gets lost and money collected as tax, and with good reason. All the economists in the world, on the right and the left, agree that tax is usually a necessary evil. The higher tax rates are, the harder it is for the economy to grow.
The global trend in the past decade has been tax reduction, from the U.S. where tax rates have been slashed dramatically in the past twenty years to Sweden, which once believed in high taxes funding a welfare state, but is now lowering them.
Israel also doesn't reject the economic theory that taxes hurt resource allocation, growth, initiative and motivation. All the committees of experts that have debated tax reform in the past thirty years, from the Ben Shachar committee through last year's Ben-Bassat commission, discussed the need to lower tax rates.
And, in fact, last November Finance Minister Silvan Shalom declared in a newspaper interview "no new taxes" under any circumstances. In December he was even more resolute, as becomes an economist with a sense of history. "The expression 'economic edicts' is obsolete. Maybe twenty years ago it was the right thing. We will not damage the standard of living, but retain its current level. That cannot be called an economic edict."
When asked about the possibility of imposing new taxes he rejected it disdainfully. "I hear about impending taxes everywhere. There has been no step in that direction and no thoughts on the matter. I said: Everyone will have to carry the burden, both the weak and the strong. Therefore there will be no new taxes here. The plan is to lower government spending."
Yet in the past few days it has appeared that the finance minister, treasury director general Ohad Marani, and Budget Supervisor Ori Yogev, have forgotten all that. Evidently, taxes, edicts, and lower standards of living are not obsolete. To paraphrase the minister, he and his staff do intend to roll us back twenty years ¿ to the days of edicts.
Not only are treasury personnel hard at work on a draconian tax plan the likes of which the country hasn¿t seen in many years ¿ both direct and indirect taxation ¿ but they are completely and utterly indifferent about it, as if it is a given that shots fired in Jenin means automatic new taxes, increased VAT, a heavier tax burden on labor and revoked exemptions.
The huge hole in the budget was not created by the IDF incursion into Palestinian towns, and the vast deficit was not born yesterday. They stem directly from the finance minister's ostrich policies, in preferring to ignore the economic deterioration for his entire first year in office, and choosing now the easy way out by piling on new taxes, instead of the hard road, budget cuts.
Raising tax rates always has a variety of code names, like "lifting national insurance ceiling", "raising health tax ceiling", or "wealth tax". But when the ceilings rise to NIS 30k, 40k, or 60k, it is clearly o longer a health tax that finances a service, but another income tax on labor.
The code name "wealth tax" is also meant to mislead the public. Wealth is not measured in gross income but in liquid income and property. The way to tax the rich is to tax the savings instruments, real estate, money transfers abroad, estates and inheritances.
But the finance minister has a soft spot for the wealthy: just two months ago he initiated special legislation to unburden them of a variety of taxes on the sale and exchange of real estate properties and homes. The legislation, known by the misnomer "reform", will cost state coffers NIS 400 ¿ 700 million.
But Shalom hasn't just initiated lower taxes for property traders. Just one month prior to that Shalom caused, either actively or through omission, the ratification of the Negev and large families laws. The "Negev Law" code conceals a law that reduces tax payments primarily for medium to high wage earners.
And now, when he has just barely finished transferring tax exemptions to property traders, contractors and well-to-do Negev residents, he comes along and raises the tax rate on labor.
Even if the emergent state of the economy doesn't allow sole reliance on budget cuts and demands use of taxation ¿ the taxes the treasury is considering are the worst kind.
Raising the tax rate on labor is at odds with the government's long term strategy and the guidance of all the treasury¿s committees and economists.
Current senior treasury personnel claim these are temporary emergency steps for an economy in a state of emergency. It is doubtful this is true ¿ the nature of crises is they last much longer than expected. Changes in the tax rate implemented now could remain for a very long time. The "economic plan" that the treasury is preparing for us could send "down the drain" - into state coffers ¿ much of the economy's achievements of the past decade.