Israel's government is casting around for a suitable response to the consumer and social justice revolution taking place before our very eyes. Some solutions will take time, as they require rigorous and in-depth study and may involve complicated legislation. Yet there are some necessary reforms that can be made now or in the near future. Given the understanding that we all have to work together if we want to maintain our economy and society's resilience, which means giving up our own selfish interests, I want to propose several simple and direct steps to the prime minister, the finance minister and the ministers' committee. First, I propose a revision of direct-tax brackets. Direct tax encompasses the income tax, national insurance tax and health tax taken from an individual's income each month. An income of 14,000 shekels per month is already taxed at 30 percent, and NIS 21,000 is taxed at 33 percent. This tax bracket increase is too severe. For citizens with incomes of up to NIS 40,000 per month, the tax rate ought to be lowered, and above NIS 40,000 that it ought to increase gradually. In addition, the current minimum wage is NIS 4,100 per month. An agreement between workers' unions and employers will raise that amount by NIS 200 starting in October 2012. I suggest that the minimum wage be raised to NIS 5000 per month. Direct taxation at this level should be no higher than 1 percent. Meanwhile, negative income tax should be abrogated, as it will have become unnecessary. We also need to deal with protective tariffs on food imports. Israeli industry has been exposed to competition with the rest of the world and as a result has become efficient and competitive, even at times when the shekel is strong. Nevertheless, we still impose fantastically high tariffs on food and agricultural imports: 190 percent on beef imports, 230 percent on potatoes, and so forth. This is what makes food in Israel so expensive. Without imports. there will be no real competition in the local market. We must gradually reduce tariffs, thus significantly lowering the cost of food. Reducing the VAT would have a marginal impact compared to reducing tariffs. Another step is to reform the law promoting capital investments. The owner of an established and profitable factory in central Israel pays 12 percent corporate tax and 15 percent tax for an owner's draw from profits. That is the case even if the company shuts down production lines and lays off employees, but only if exports per cycle are at least 25 percent. On the other hand, a person who starts a new business or factory in the periphery, thus creating new jobs, will pay a corporate tax of 24 percent and an owners' draw tax of 25 percent if he doesn't export 25 percent of his product. The beneficiaries of these perks and benefits should be new factories or businesses in the periphery, and the test of their eligibility should be the creation of new jobs. And one final thing: There should be a three-year freeze on wage increases in all the essential services that are part of the public services owned by the government, like sea and air ports, the electric company and water companies, with the exception of wage increases caused by personal promotions. This could be the strong unions' contribution to the wider public. As everyone knows, these organizations offer their employees hefty raises as well as ample and excessive perks and the cost is borne by the broad public in the form of sky-high bills. These are basic proposals that can be implemented quickly. Together, they would go a long way toward a better distribution of our national wealth.
