expanding state budget must be stopped, taxes should be lowered

Posted on Feb 2, 2018 by Ifi Reporter

In recent days it was published that the Ministry of Economy plans to take steps to facilitate personal imports. Among other things, this is a new legislation that will exempt consumers from paying inspection fees to the Standards Institute for products that have been formally regulated by the Institute. After recovering from the shock that such a duty had to exist, we must understand that these easements are a small step in the right direction, but they do not bring about a real improvement in our standard of living.

A major economic problem in the Israeli economy is the low level of fertility. In other words, every hour of work the Israeli economy produces less than the average in developed countries. The significance of this low productivity is critical. First, business owners can not pay their employees high salaries, because only high productivity allows high wages - for if wages are higher than fertility, a loss is created. Second, low productivity forces the Israeli worker to work long hours in order to reach a reasonable level of income. The result is that the Israeli worker works many hours relative to the average of the developed countries, but earns relatively little. That is, bald leaves from here and there.

A major reason for low productivity is that the state protects some local businesses from competition from abroad, and when local factories and businesses do not have to compete with manufacturers from abroad, locals do not need to invest in machinery, employee training, and efficiency. In other words, they do not have to improve in order to reach the accepted level abroad.

And when there is insufficient competition, mediocrity celebrates, the machines are old, the workers are not trained, and the business product per hour, that is, productivity, is low. By the way, the high-tech sector competing all over the world boasts very high productivity. It balances the low productivity of the local economy and allows for a reasonable general standard of living in the country.

What is the connection to the easing of imports? The connection is that most of the easements we are now witnessing are given to products that are not manufactured in Israel, such as televisions and computers. In other words, these alleviations alone do not affect the low fertility rate in Israel. Alongside these exemptions, free import of all goods and services imaginable, including those that compete and threaten local manufacturers, must be allowed. Only opening the economy to real competition - without tariffs, quotas and tricks from the Standards Institute - will help create a prosperous and rich economy.

Another point is that these reductions, including a decrease in purchase taxes and customs duties, are likely to lead to a reduction in the country's tax revenues. There are those who will say that there is no problem here because taxes are a bad thing and all is welcome. But the cost, or the damage that the state causes us, is not limited to the taxes it collects, but rather the money it spends. Because spending (and regulation) are precisely those that accurately reflect the centrality of the state in our lives. Taxes are only one means of financing government spending, while another means of printing money, and the means that is more relevant to us - the deficit - that is, an increase in the national debt, which is the debt we all have to pay.

The unending growth in the ever-expanding state budget must be stopped and taxes should be lowered simultaneously. This, combined with sweeping deregulation, will make Israel an economic model. There is no other way