How to shrink government in Israel step 1: Zero taxes for public employees

I was listening to a lecture by Murray Rothbard the other week about John Maynard Keynes the man. The lecture itself was fascinating, and revealed to me that Keynes referred to himself as an “immoralist” who lectured about the virtues of homosexuality over heterosexuality, actively preferring the former even though he was actually attracted to women. It became clear to me that this man was entirely backwards to the core, and now has the world addicted to the idea that in order to become rich, one has to go into debt.

But there was one thing that stood out that had little to do with Keynes in that lecture. That is, Murray made the offhand remark that public employees – meaning anyone receiving a government paycheck – should not pay any taxes. In fact, public employees are the ones that are living off of private sector tax money, and it makes no accounting sense to have them pay back into the very funds they are living off of.

Instead, public employee pay should simply be reduced by the percentage they would have had to pay in taxes had they been private sector workers. For example, let’s say a Knesset Member gets 20,000 shekels a month and pays 6,000 in withheld income tax, arnona, bitach leumi, and whatever else he pays. Instead, he should simply earn 14,000 shekels period.

What’s the difference? The difference is huge. The fact that public employees “pay taxes” so to speak blurs the line between private and public sectors – between who pays taxes and who consumes them. It makes people think that the tax eaters pay equally into the trough, when in fact that are simply consuming and vomiting back into it. If public employees – ALL of them – paid ZERO taxes – no bituach leumi, no income tax, no arnona (land and property taxes), nothing at all as all these taxes go to fund their salaries anyway, then it would become much clearer who is eating and who is producing. It would give Israel a much better idea of exactly how big their government is and how destructive. And people would start to wake up about what exactly they’re paying and to whom.

Special pay stubs should be made for all public employees that show ZERO withholding. These should be plastered all over the place. They would not be required to file a return at all. They would simply earn less. This means no doctor would pay any taxes, no state-employed Rabbi, no Knesset member, no government clerk, no judge, no police officer, no Shabak agent, not a single active duty soldier, the prime minister, the cabinet, their aids, no child day care employee, no school teacher, no public university professor, no histadrut labor union worker, garbage man, no public radio talk show host, no school administrator should pay a single shekel in taxes of any kind whatsoever from their tax-funded salaries.

They should not feel that they are contributing to the public tax burden, because in fact they are feeding off of it. Every penny of their salaries is tax money. They should understand that very well. And the people of Israel should understand very well just how much of their lives the state runs, how humongous their public sector is.

Only then will it start shrinking.

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3 thoughts on “How to shrink government in Israel step 1: Zero taxes for public employees

  1. You would have state employees pay no taxes, just “withhold” them.

    Well they still pay grocery VAT, and you can’t change that easily. They also get all the same loss of value from state policies in all areas of life, pay for licensure, marriage certificates, etc., suffer from central banking, pay for gas tax, luxury taxes, vehicle sales tax, and what their neighbors might have produced had their money not been removed compulsorily from the market by the state.

    But to whatever extent you would institute “withholding” this is still deceptive, because when you get a cut from the king as your pay, you are hardly “paying” the king. This does not change the salary either, and public scrutiny would change nothing. For example, if the salary demanded by the market for cleaning bathrooms is 100 shekels, and taxes are 10%, the state’s cleaner will be paid 110 before taxes or 100 sans or “after” taxes. The state will overpay what they imagine is correct, but they do still have the price signal of finding no cleaning applicants at, say, 50 shekels.

    What did I get wrong? I am no economist.

    See Yalkut Shimoni Isaiah 504, which raises some questions:

    שנו רבותינו “לולב הגזול פסול”. מ”ט, אמר רבי יוחנן משום ר”ש בן יוחאי משום דהוה ליה מצוה הבאה בעבירה, שנאמר “שונא גזל בעולה”. משל למה הדבר דומה, למלך שאמר לעבדיו תנו מכס למוכסים, אמרו לו עבדיו, אדונננו המלך, והלא כל המכס שלך הוא.
    אמר להם, ממני יראו עוברי דרכים ואל יבריחו את המכס. אף הקב”ה אמר ממני ילמדו בני ויברחו מן הגזל.

    Thanks,

    Chaim

    • Wait, I think I get some of it now. I wrote my first comment too quickly. It would probably stop the overpaying at least, when people compared their salaries to the equivalent state job. My other points still stand.

      Anyway, I would appreciate your thoughts here.

      • I’m not sure what you’re objecting to. I’d like every single government employee to have a special card that exempts them from ALL taxes. Sales taxes, excise taxes, everything, and to make it illegal for them to pay any taxes. If they are caught trying to pay a tax, the should kicked out of office.

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