Why did the government fall so much in love with fuel and cigarette taxes?

Inflation is a recipe for trouble and straight taxes reduce growth, so to raise money the government is turning to a third channel - indirect taxes. The problem is that it has already become a convenient ideology for her

Why did the government fall so much in love with fuel and cigarette taxes?

(Video: What to do with Excess Taxes)

There is something very interesting about the way the Israeli government raises money. In general, the government has three ways to raise money: direct taxes (income tax and corporate income tax), indirect taxes (VAT and taxes on products such as cars, tobacco and alcohol) and inflation. The third option is not in fashion, although it is probably politically convenient, in years The 1980s turned out to have devastating effects on the economy. The first option is not in fashion because it is politically poor: when the IRS raises everyone feels it immediately, and no politician wants to annoy the public in a country where elections happen once every three months.

Apart from the political problem, direct taxes are also really damaging to the economy. One could argue that when the government takes a large share of the salary it hurts the desire to work. Burner to this, there are also quite a few works that show that income tax and corporate taxes contribute to the reduction in inequality, but any increase in them leads to a decline in growth. And because in the State of Israel, the public consistently chooses parties that favor growth over a reduction in inequality, the public gets what it wants, and income tax does not rise, or even decrease.

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It is always for the benefit of the citizens

So there was only one option left in vogue, which is the option of indirect taxes. They really have a lot of advantages: first, when they are raised, it can be argued that it is in the public interest. This is what you do every time you raise taxes on tobacco, alcohol, cars and fuel - it's all in the public interest. After all, these products are harmful products - tobacco and alcohol damage our health, fuel damages the environment and cars hit us. Second, when prices go up, you are not going to demonstrate to the Treasury. In 2011, social protests concentrated on Tnuva's chairman's house rather than on the Treasury's home office, even though the rise in prices was due to the Treasury's policy no less than Tnuva's conduct. Third, these are taxes that make a lot of money - people's income tax Can evade, shopping taxes is much harder.

So indirect taxes are definitely a good option. The problem is that the government has already fallen so in love with indirect taxes that it has turned indirect tax revenue into ideology, rather than taxes being a tool for ideology implementation. For example, as soon as the government had a revenue problem last year, the solution was to raise the tax on hybrid vehicles, despite the rise in the price of hybrid vehicles contrary to the government's stated policy of reducing greenhouse gas emissions. And since we also have a deficit in 2020, the Treasury is already planning a VAT increase as soon as the next government comes along, and no one seems to be voting against it.

Because it is true that a new government is supposed to implement a new ideology, and so before deciding on taxes or expenses, it is first and foremost to decide what its priorities are. But apparently in our country to impose a tax that raises prices is not a matter of ideology, it is simply a matter of how it is.

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