Can you follow Israel’s lead and cut your wages?
Tiny Israel has a deficient of some $10 billion or 4.2% of the Gross Domestic Product (GDP). According to Professor Omer Moav, an economist at Hebrew University, each Israeli household is in debt for about $5,000. On top of the over-the-top budget deficit, the State also has a national debt equal to 74% of its GDP, of which 6.5 percent of GDP is targeted for defense (http://tinyurl.com/leeeofq).
By comparison, the Netherlands taxes are zero percent of the county’s GDP, but the individual tax rate is 52% and the sales tax/VAT is 19 percent. 16 countries have a higher sales tax/VAT, while five countries have a higher maximum income tax; three other countries share a 45% tax rate with Israel. Information from World Tax Rates, (http://world.tax-rates.org/).
To counter that debt, the State is raising the Value Added Tax from 16% to 18% (the same as the UK and Turkey). It also is raising the income tax rate . The rate for 2012 was 45% for individuals. The Knesset is proposing a higher rate and the Bank of Israel predicts tax increases will be needed again in 2015 and 2016 (http://tinyurl.com/laz7tud).
While the government, as all governments do, is planning to raise taxes, the Israeli government has voted – 38-15 – to cut the salaries of Members of Knesset (equals to the White House, Senate, and House) by 10 percent. It also voted to cut public sector worker’s pay by one percent.
According to the Times of Israel (http://tinyurl.com/khx75ql), “In addition to many benefits, including leased cars and an allowance for clothing, parliamentarians currently receive an average salary of approximately NIS 38,000 ($10,500) per month.”
Now imagine if the politicians in Washington took a 10% pay cut. For POTUS, that would be a savings of $20,000. Rank-and-file members of the Senate and House receive only $174,000/year making 10% only 17,400 per politician per year. Multiply that by 48* senators and the taxpayer has saved $825,200 in the Senate alone. Add in the 432* voting members of the House for an additional savings of $7,516,800 – more than 7.5 million for a total savings of $8,342,000.
* The Speaker of the House is paid $223,500 ($22,350), while each majority and minority leader in each chamber is paid $193,400 ($19,300 * 4=$77,200).
In addition to their salaries, POTUS gets a $50,000 tax free “allowance” while the vice-president only gets a paltry $10,000 tax free allowance on top of his $230,000/year stipend. (All compensation information from infoplease (http://tinyurl.com/yva4ts).
Granted, that’s just a symbolic drop in the bucket against the nation’s $16 trilling and rising debt. (Watch the debt clock at http://tinyurl.com/p3n6la and http://tinyurl.com/73srjpt.)
Drop in the bucket or not, it WOULD be a welcomed good will gesture, hopefully to go along with a reduction in vacation travel at taxpayer expense – the Obamas have racked up a roughly $20 million tab for annual vacations to Hawaii (http://tinyurl.com/bhgubc6), the most recent a mere $3,629,622 (http://tinyurl.com/d6xonv7).
According to HawaiiNewsNow (http://tinyurl.com/kmptkrh), “A conservative watchdog group has filed suit in Federal court in an effort to obtain records on the costs of President Obama's vacations in Hawaii.
The group Judicial Watch said it filed a Freedom of Information Act lawsuit in U.S. District Court in Washington, D.C., against the U.S. Secret Service. The suit seeks ‘all records concerning use of U.S. Government funds to provide security and/or other services to President Obama and any companions on their January 1 and 2, 2013, trip to Honolulu, Hawaii’." No one is denying POTUS time off with his family, he’s so rarely in the White House as it is; Air Force 1 (at $181,757 per flight hour) seems to be his “home away from the White House.”
- Never mind that in Israel, Prime Minister Benjamin Netanyahu was pilloried for a trip with his wife, Sarah, because they insisted that an El Al jet be outfitted with a private bedroom for a 5-hour flight. (Israel lacks the equivalent of an Air Force 1 and has to buy time on the national airline, almost like any Israeli.) According to the Jewish Telegraph Agency (http://tinyurl.com/l2oqye8), “Netanyahu spent $127,000 on a custom-built bedroom for a 5 hour flight. The bedroom consisted of a bed and partition. The bedroom’s cost was tacked on to the $300,000 bill for flying Netanyahu, his wife, and his entourage to former British Prime Minister Margaret Thatcher’s funeral.” Perhaps the Israeli public was still upset over Netanyahu’s annual office budget that included $2,700 for his favorite whipping cream. The Netanyahu’s’ round-trip to England hardly matched POTUS and family’s trip to Hawaii, but then Israel has a smaller GDP.
The bottom line: Even though the Members of Knesset are taking only a 10 percent pay cut and it is but a drop in the fiscal bucket; at least the MKs are giving up something which is more than most politicians in Washington – and at State capitals – are willing to do.