Moshe Feiglin Makes a Mistake on Zero VAT מע”מ אפס

This is for all the people who think I’m a mindless follower in a personality cult. I have criticized Feiglin in the past and I don’t agree with him on everything. Well now I’m going to do it again.

In his last Facebook post, he writes:

מע”מ – אפס פיתרון.

מע”מ אפס – פתרון למצוקת הדיור או העמקת הפער לטובת העשירים?

כבר מזמן פרסמתי את דעתי כי השורש של מצוקת הדיור הוא במצוקת הקרקעות לבנייה. כל עוד מדינת ישראל תחזיק ברוב הקרקעות ותספסר במכירתם מחיר הדיור ימשיך לעלות.

יש לחלק קרקעות לבניה לכל מי שסיים שרות צבאי או אזרחי באזורי הפריפריה בתנאי שהוא אכן יממש את הבניה בתוך פרק זמן סביר. יש להקים ערים כדוגמת מודיעין בשיפולי השומרון והרי יהודה. הגדלת מצאי הדירות תוריד את המחיר.

ברור שהצעתו של השר לפיד למע”מ אפס לא תייצר אף דירה חדשה ורק תעלה את המחירים. אך יחד עם זאת, פתאום הבנתי שהצעה זו חמורה פי כמה באמירה החברתית שלה היות והיא מגדילה את הפערים בין העניים לעשירים באופן מובנה.

לדוגמה: זוג בעל אמצעים שיקנה דירה ב-1.6 מליון שקל יזכה להטבה של 288,000 ₪. לעומת זאת, זוג בפריפריה שיקנה דירה ב- 800,000 ₪ יזכה רק למחצית מהטבה זו וכך השר לפיד יתרום באמצעות הכסף שלנו להגדלת הפער בין המשפחות בעוד 144,000 ₪.
יתרה מזו, ההטבה היא רק למי שקונים דירות חדשות, אבל מי שאין בידם אמצעים לקניית דירה חדשה ומסוגלים לקנות רק דירה יד שניה ב-300 או 400 אלף שקל לא יזכו לשום סיוע וכך הפער יגדל בין משפחות אלו לבין המשפחות שיקנו דירה ב- 1.6 מיליון ב- 288,000 ₪.

בקיצור, השר לפיד, אם אתה רוצה לחלק הטבות לזוגות הצעירים שאין להם דירה גם בלי לפתור את בעיית הדיור לפחות תעשה זאת בדרך הוגנת שלא מגדילה את הפער בין עניים לעשירים.
תקבע שכל מי שעומד בקריטריונים שקבעת יקבל בעת קניית דירה שתעלה לא יותר מ- 1.6 מיליון שקל, מאה אלף או מאה וחמישים אלף או כל סכום אחר שתחליט.
בדרך זו לפחות תעזור לכלל הזוגות הצעירים ממעמד הביניים ומטה באופן שווה, אף על פי שסביר להניח שתגרום להקפצה של כלל מחיר הדירות.

.ותודה לחבר מרכז הליכוד עובד חוגי שהעיר את עיני בנושא זה.

Translation, and I will put in my notes in italics:

VAT = Zero Solution

Zero VAT – A solution for the housing shortage, or a deepening of the divide in favor of the rich?

Immediately he starts off here on the wrong foot, talking in terms of class warfare between rich and poor, in a classic Marxian antagonistic sociological setup.

I have already made clear my position that the root of the housing shortage problem is the shortage of land for building purposes. As long as the State holds 93% of the land and will not sell it, the price of housing will continue to rise.

Spot on, nothing wrong with that sentence.

It is clear that Lapid’s proposal for zero VAT on new housing projects will not  create a single new apartment and will only raise housing prices.

Right on the first part, wrong on the second. Getting rid of the VAT will not create any new apartments than otherwise would have been built because consumption taxes do not affect the price of goods directly. Only supply and demand does, and taxes are never passed down to the consumer. They can only be passed up to land and labor factors, ultimately. Will zero VAT raise housing prices? Certainly not. Housing prices will be unaffected because VAT has nothing to do with supply or demand directly.

We must parse out land for building for free to anyone who completes military or civil service on the periphery on the condition that he builds on the land within a reasonable time frame. We should build cities like Modi’in in the Shomron Valley and the Judean Hills. Raising the supply of apartments will lower the price.

Mostly good, except I wouldn’t condition it on the completion of any service to the State. To hell with serving the State. Anyone at any age who wants to build anywhere should build there, anything, anytime, on any virgin unsettled land, period. Just announce that this is now legal, and you’ve solved the entire problem.

It is clear that Finance Minister Lapid’s  proposal for zero VAT will not create a single new apartment and will only raise prices. But together with this, I now understand that the proposal is much worse in what it says socially since it broadens the gap between rich and poor substantially.

Oh no! Moshe is talking like a politician now. Anyone talking about “the rich” and “the poor” and “the gap” between them is trying to be a social engineer through tax policy, and that is not good. But here’s where it gets bad:

For example, a couple with the wherewithal that buys an apartment for 1.6M NIS will get a benefit of 288,000 NIS from this bill. That’s compared to a couple on the periphery that buys an 800,000 NIS apartment and will only get half of the benefit, and so Lapid widens the gap between rich and poor by another 144,000 NIS. Worse, the tax benefit is only for those who buy new apartments, but those who cannot and only buy a secondhand apartment for 300 or 400,000 will not get the same benefit and therefore the gap between these families and the ones that buy a new apartment for 1.6M NIS will be 288,000.

Wow. That sounds like it came right out of Shelli Yechimovich’s textbook, or one of Amir Peretz’s stump speeches. It is quite bad. Here’s a reductio ad absurdum: Lapid proposes to get rid of all VAT for everyone on everything. No more sales tax on anything period. Now, a couple that buys an apartment for 1.6M will get a benefit of 288,000. Compare that to a couple that buys a house for 800,000. That couple only gets 144,000 in tax benefits. Worse, rich people buy a lot more stuff than poor people, so getting rid of sales taxes will widen the gap between rich and poor.

The basic fallacy here is taking the post tax status as the natural one, and then treating the tax-free status as some artificial benefit. Worse, it is assuming that VAT affects the price of goods directly, and Feiglin contradicts himself. He says it will raise the price of houses, but that the rich couple will get a benefit? How can it be both? Either the price will rise, or the price will fall and there will be the benefit. You can’t have it both ways. The price will not fall, there will be no benefit in terms of prices, only in terms of the amount of profit that the homebuilder can take home, and then use that to build more houses, which would in theory lower the price if the government didn’t own 93% of the freaking land supply. 

The price is the price regardless of how much the government rakes from the top. It will not change if you take away VAT. so there is no direct benefit for anyone except the home builder, not the buyer. Backward, never forward. 

Cutting taxes in any case is not a “benefit”. It is not a benefit. It is JUSTICE.  If someone steals less from you, that doesn’t widen a “gap”. All it means is that overall, less theft is going on, and that’s good. The government’s job in a miarchist society is not to maintain a gap at a certain maximum level. If that were true one could just steal money from anyone above a certain income and subsidize anyone below a minimum. That would at once maintain a gap and destroy the country pretty quickly at the same time.

The richer people are, the better off everyone is, assuming the money did not come from the political means, meaning direct government money taken from plunder. The richer people are, that means the more they are providing for people’s needs, which means the richer EVERYONE is. A profit means there is a demand for something, so keep making it until the supply grows to the point where there is no more profit, and then move on to something else. Screw the gap, the gap doesn’t matter, and it should not be Feiglin’s goal to engineer a gap to a certain size. What matters is how much money is kept by the people who work, versus how much is stolen by the people who rule over them. 

Lapid’s proposal for zero VAT on ANYTHING should be supported. Whenever a government official wants to lower taxes for anybody at all, that is a good thing. It doesn’t matter for who. Is it a perfect proposal? Absolutely not. But it lowers taxes, and therefore Feiglin should support it. If we start nitpicking that we don’t like a tax lowering proposal because it doesn’t lower taxes the way we want, we will never shrink the state. 

Final note: Feiglin makes mistakes sometimes. It’s OK, he doesn’t make many, and a few here and there is understandable. But everyone should know that I am no cult follower of anyone whatsoever and I will point out when the people I support make mistakes. It is actually a source of relief to know that despite my fire about these things, I am no true believer.

I have contacted him on the matter and he answered that he was writing from within the conceptual framework of Lapid, not his own. Well, OK. But to me that wasn’t 100% clear from the post.