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Judy Maltz: Bibiďż˝s Bonus

Netanyahuďż˝s new tax cut has some unintended benefits. Call it his afikoman present to the nation. Only this one came before the Seder.

On Passover eve, Finance Minister Benjamin Netanyahu announced yet another series of tax cuts aimed at giving an economy that appears to be on the road to re-covery an extra little push. The list included an income tax reduction that targets low- and middle-income earners, a cut in the corporate tax rate and lower purchase taxes on a host of building inputs. The income tax reduction, scheduled to take effect on July 1, is meant to benefit workers who earn 4,000-11,000 shekels ($880-$2440) a month, increasing their take-home pay by anywhere from 59 to 180 shekels ($13 to $40). Effective from the same date, the corporate tax rate will begin dropping from 36 percent to 30 percent over a period of four years.

The official explanation for the timing of this move was that state reve-nues were larger than forecast for the first few months of the year. Rather than use the money to increase government spending, Netanyahu said he preferred returning it to where it came from, that is, before his fellow cabinet ministers got any ideas about putting their hands on it.

While he wonďż˝t admit it, it seems clear that Netanyahu had a political motive as well: With new elections a likely possibility, as Prime Minister Ariel Sharon becomes ever more deeply entangled in corruption allegations, anyone who views himself as a front-runner for the top job, as Netanyahu most certainly does, would want to get a head start in the race by getting on the good side of the public. Call it "election economics," if you will.

Does that make it a bad move? Not necessarily. Indeed, Netanyahu appears to have learned a lesson and, rather than helping high-income earners, decided this time around to make low- and middle-income earners the exclusive beneficiaries of tax cuts. As for the gradual reduction in the corporate tax rate, Netanyahu has a point when he argues that company taxes around the world are declining, and Israel canďż˝t afford to defy this trend if it wishes to play in the global arena.

Interestingly, the first to come out against Netanyahu was Bank of Israel Governor David Klein. Any unforeseen revenues in the state coffers, argued the central bank chief, should be used to rectify a more pressing problem plaguing the Israeli economy: the huge public debt.

What Klein neglected to mention is that tax cuts also do nothing to solve Israelďż˝s most burning socioeconomic problems, namely growing inequality, widespread unemployment and the collapse of basic social services. If helping the lower class was his prime concern, for example, Netanyahu would have used the unexpected increase in state revenues to return welfare payments taken from the poor earlier on in his tenure, or at least to create new jobs for the chronically unemployed. Investing in more hospital beds or smaller classrooms would have also put the money to good use.

Moreover, since about half of Israeli workers don't even make enough money to pay taxes, tax cuts are meaningless for them.

Netanyahu, who views taxes as the epitome of all evil, would have you believe that Israelis pay more taxes than anyone else in the world. That's simply not true. Many European countries have an even higher tax burden than in Israel, and in contrast to what Netanyahu would have you think, people work in those countries, and the quality of life there is exceptionally high.

The main difference between Israel and other countries that have high tax burdens is that in those other countries, tax money is used to provide the public with better social services, while in Israel itďż˝s usually soaked up by the military, or by the settlements and other interest groups who represent only a small share of the population but know just how to pull the right strings. That being the case, and without it being his original intention, Netanyahu probably did us all a service this Passover by finding the money a better use.