One Cheer for Kahlon, and A Word on Protectionism

Moshe Kahlon, chairman of some party called “All of Us” and as the Finance Minister for some reason has the power to get rid of certain taxes singlehandedly, will be getting rid of all import taxes on products that are not produced in Israel. I’m pretty sure this means products where a tariff on them does not protect any industry in Israel.

The tagline of the article is this though, and it’s pretty stupid:

היום הוכרז המהלך שיביא להורדת יוקר המחיה על ידי הוזלת מאות מוצרי צריכה שאינם מיוצרים בארץ. שורת המוצרים עליהם בוטל המכס כלל לא מיוצרים בארץ – ולכן אין שום סיבה שהמדינה תטיל עליהם מכס

Today it was announced that a process will begin that will bring down the cost of living by cheapening consumer products that are not produced in Israel. The products that will no longer have tariffs are not produced in Israel at all – therefore there is no reason for the State to place tariffs on them.

The fact that tariffs on these products will be taken down is great, but the reasoning is idiotic. Tariffs are just a cash grab that uses protectionism as an excuse. They are not there to “protect Israeli industry”. They are there to take money away from you and put it in the hands of the government.

First of all, if the government wanted to protect domestic industry, it would just forbid imports from other countries of products that compete with Israeli industry. But it doesn’t do that. It just takes a cut from you if you buy the competition, because what the government really wants is not protected industry, but money, however it can get it and from whoever it can get it, with any excuse it can use to do so.

Second, the whole idea of protectionism is asinine. It’s easy to see if you take the extreme case. Let’s say an Israeli company can only produce widget X at a cost of a billion shekels a widget because the company produces widget X by hand and does not have the know-how to produce it via capital equipment like machines.

A Japanese company, or whatever country, can produce the same widget X for one shekel a widget, because they have a machine that can do it really quickly and cheaply. The problem with “protecting” the Israeli widget X industry by slapping a tariff of 999,999,999 shekels per Japanese widget X becomes obvious.

If any Israeli company can only produce X expensively versus a Japanese company that can produce X cheaply, it means that the Israeli company is bad at doing what it does and it should stop doing it and go out of business, and the people who worked for that bad company should do something else with their time that is more efficient, something that they are better at than the rest of the world.

To protect an Israeli producer by taking money from consumers means harming Israeli consumers.

But yeah, good for Kahlon. Even though he’s not the sharpest butter knife in the drawer, he’s doing something good here.

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One Cheer for Moshe Kachlon – Lower Alcohol Taxes!

I’ve written a lot about Kachlon in the past and how much I can’t stand the guy. Notwithstanding all the damage he’s done already in raising all kinds of housing taxes, he actually did something good today and lowered alcohol taxes from 4.33 shekels per liter of beer to 2.33. He also lowered taxes on hard liquor from 106.9 shekels per liter of ethanol to 85 per liter.

This was the status quo ante 2012, when Yair Pretty Boy Lapid came into office, who I should mention is publicly know to have once been, and may still be, a raging alcoholic. Pretty Boy Lapid, seeing the light and crusading against alcoholism by making everyone who buys alcohol pay him more money, had the goal of lowering the consumption rate of alcohol in Israel.

And by some kind of miracle called markets and supply and demand (miracle to Lapid anyway), it didn’t work. Why not? Because it’s not that hard to brew your own alcohol. You can do it yourself with some grape juice, some yeast, and a Water distiller.

I used to buy Arak from time to time. I haven’t bought a single bottle since 2012. They will not get extra tax revenue from me. I can theoretically make my own Arak now with anise extract and all the above materials.

The politicians just figured this out, the idiots:

הצוות התייחס גם למיסוי המוטל על משקאות משכרים (כגון וודקה, וויסקי, עראק, ג’ין וכו’). מנכ”ל האוצר מסר לשר כי בחינת העלאת המס בשנים 2014-2015 הצביעה כי למרות התכנון המקורי, הרי שהעלאת מס הקנייה כלל לא הביאה לתוספת הכנסות במונחים ריאליים.

בהתאם להמלצות הצוות, נדרש שינוי מבני מיידי גם בשל ההתפתחויות השליליות בענף האלכוהול – התפתחות של תעשייה פיראטית שמייצרת משקאות מזיקים לבריאות, פגיעה בציבור העוסקים הישרים שנאלצים להתמודד עם שוק שחור בהיקפים לא מבוטלים ופגיעה בציבור הצרכנים בשל העלאת המס.

The committee also changed the tax level on hard drinks like vodka, whisky, arak and gin. The director of the finance department told Kachlon that the 2014-2015 tax raise showed that despite original planning (sic), raising the sales tax did not bring in additional tax revenue.

In keeping with the recommendations of the committee, an immediate change is needed due to the negative developments in the alcohol sector – the development of pirate manufacturing that can harm health, hurt the alcohol industry that needs to compete with a substantial black market, and hurting consumers who need to pay the higher tax.

And as an additional testament to the BS you often find in mainstream state-controlled media, here are two paragraphs. The second from the article about lowering the tax, and the first from an article when Lapid raised it.

מלשכת השר שטייניץ אמרו בתגובה לדברי לפיד על המס על האלכוהול: “בהמשך לדברי שר האוצר לפיד בנוגע להעלאת המס על האלכוהול האחרונה, אמר השר שטייניץ כי מעולם לא קיבל החלטה ולא התחייב לקבל החלטה לעלות את שיעור המס. במסגרת התהליך המבורך של קבלת ישראל ל-OECD הוסכם על שינוי שיטת המס החל משנת 2014, בהתאם למודל הנהוג במדינות הארגון. אולם, ההחלטה עצמה על גובה שיעור המס נותרה לשיקול דעתו של שר האוצר בלבד.

(Short translation: The rise in alcohol taxes is due to a deal with the OECD, which just accepted us yay, so we’re doing this as a favor to them, because they said so and we made a deal. And by the way, the actual level of the tax is only up to the Finance Minister, Pretty Boy Lapid, raising a big question about what the heck the first sentences of this paragraph about the OECD even means.)

And now for the article that just came out about lowering it back down:

רמת מיסוי הנהוגה כיום גבוהה משמעותית מזו הנהוגה במדינות ה-OECD. בחינת התוצאות של העלאת המס על בירה בשנים 2013-2015 הראתה כי למרות ההכפלה של המיסוי, הדבר כמעט ולא השפיע על היקפי הצריכה של בירה. המשמעות כי המס שהוטל בשנת 2012 הכביד על ציבור הצרכנים מבלי תרם באופן ממשי לעניין צמצום השתייה המזיקה.

Short translation: Taxes were lowered back down because they were much higher than the level accepted by the OECD. And tax revenue wasn’t increasing so there was no point.

You have to laugh at this. I hope Lapid falls off the wagon and goes binge drinking tonight. Maybe he’ll come down with the DT’s and have a near death experience, be saved in the emergency room and then retire. (I’m joking, I don’t wish him the DT’s.) I’ll fund his alcohol budget personally if he would just go away and stop passing any laws. I wish him well, and to leave me alone. As they say in Hebrew, תהיה בריא.

One cheer for Kachlon. Just one.

Kahlon Jacks up Taxes on Home Purchases, Home Prices Plunge (HA HA No They Don’t!)

Moshe Kahlon, that fake fraud pathetic slime, has raised taxes on houses for investment by as much as 10% of their value.

Finance Minister Moshe Kahlon appears ready to make good on his promises to lower housing prices – but critics said that the first move he was making on the subject was actually likely to backfire.

On Sunday, at Kahlon’s behest, the government significantly increased the purchase tax on apartments and homes purchased for investments. The increases will tag between 5% and 10% on the price of an investmentproperty.

The logic goes like this:

Housing prices are too high, so if we all give more money to the GOVERNMENT instead of to the people SELLING THE HOUSE, they’ll go down.

MAKE SENSE?!

It’s not supply and demand! It’s how much money you give to ME, MOSHE KAHLON, INSTEAD OF SOME OTHER GUY! The more you give to ME…the richer everyone will be!

It’s beautiful logic, especially when you’re a dirty scum politician like Moshe Kahlon. Riding in on a wave of popularity after you accidentally did sort of the right thing but have no freaking clue why it worked.

Raise taxes. That’ll solve everything.

Kahlon’s First Move To Lower the Cost of Living: Raise Taxes

I saw this one coming. If you thought Moshe Kahlon and his Kulanu Party are a group of economic geniuses, it turns out they’re a group of politicians looking for more excuses to take more money away from you. Really, only a politician could think up an idea like raising taxes to make your cost of living go down. Bluntly, it’s saying this: You want to be wealthier? I’ll just take more money away from you and then voila! You’ll suddenly be wealthier. Amazing.

An article out in Calcalist, a hack magazine if there ever was one where they throw jargon at you but nothing makes any sense, says that even before Kahlon goes into the Finance Ministry, the bureaucrats there are busy cooking up a plan to take away tax exemptions on property gains for those who own apartments as investments, and to tax rental apartments.

It’s amazing really. That this is what they think of. Not building more, not freeing up more land, not giving away land to build, not even selling land. Raising taxes.

What will this cause? A lot of people want to say that the tax raise will just be passed down to the renter. It won’t. That’s impossible. Rental prices are what they are not because of taxes, but because of supply and demand of houses.

What will happen, though, logically, is something like this:

The people that buy apartments to rent them out have the capital to do so. They have the savings to make a down payment on the house in order to rent it out. The ones that rent, usually do not have the capital or income to qualify for a mortgage. So they don’t buy houses. And now, even if they could, they’d have to pay taxes on property gains.

So what’s going to happen is that the moderately rich people who can afford a house or two as an investment, will sell them in order to escape the new taxes. But who will buy? The people who can’t afford a mortgage now? Certainly not. The ones who will buy will be the super rich who can afford so many houses that the economies of scale will keep real estate investment profitable only at a higher theshold that only the superrich can afford.

So the landlords scraping a living at modest investments, all that income will now go to the superrich. I have nothing against the superrich unless those riches came from government. I’m just saying that they end up benefiting the most from government intervention like this.

The other alternative would be to make it much much easier for a person who cannot afford a mortgage now, to afford one in order to buy a house. That would mean forcing banks to accept people who make no down payment, and then we’re back where we started at the housing bubble.

So super wealthy real estate owners rejoice. You’re about to get a lot more real estate at a discount. But rental prices ain’t goin down until you INCREASE SUPPLY.

 

 

Why Moshe Kahlon is a Total Fake

Sometimes dirty politicians are caught at the right place at the right time, and everybody thinks they’re a hero. This is the case with Moshe Kahlon, another Likud politician who left the party to form his own Kulanu party. Others who left have been Lieberman, Bennett, Livni, and Sharon. Kahlon is a two-bit loser lacking any guts or backbone, that was shoved in the right office at exactly the right time to make one move and now people worship him.

What people think he did was introduce competition into the cellular market, thereby lowering prices. If he had done this, it would have been a good thing. Unfortunately, this is only partly true. He did allow other phone companies to exist (amazing) thereby increasing competition. But there was one caveat that nobody seems to care about that will bite everyone in the ass very soon.

They never tell you this detail in the media, because the media is stupid. But Kahlon’s “reform” goes like this. Companies have a finite amount of time to start up and get as many customer as possible. In order to enter the market they have to pay a huge deposit to the Misrad HaTikshoret or whatever department is the overlord of the phone market. And then the 4 or 5 (forget how many) companies with the most customers gets their deposit back from the overlord government department.

This, of course, encourages rock bottom prices at a loss for the phone companies because they are trying to stay alive in the race to be allowed to continue operating. My phone bill, for example, is 10 shekels a month with Golan Telecom. They are charging ridiculously low rates because the owner, Something Golan, wants to be in the running to survive and get his deposit (bribe) back from the government.

After the time limit is up, which I believe is at the end of 2015, the remaining companies will then jack up prices to higher than market rates in order to make up for their losses in trying to bag as many customers as possible within the time limit. There will STILL be a lack of supply because other companies will STILL be banned from the space and forbidden from competing with the survivors.

So much for Moshe Kahlon, who, if he had any guts, would have simply closed his department and allowed anyone to start a phone company at any time anywhere.

All a government minister has to do in order to really succeed is close his office, lock the doors, and never show up.

Unfortunately, that is not what Kahlon did.