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Israeli Children: National Assets or Liabilities? – TheChild Allowance Fallacy
Sam Ser
is a longtime buddy of mine and so I am on his email list as he is onmine. I think he is a very talented writer and a keen analyst. Okay, he's not achareidi - but nobody's perfect. (Of course, he will say that I am a charedi - butnobody's perfect.) Most of what he writes does not cross paths with my subjectmatter. Still I respect him as a free-thinking person who can look at an issueobjectively and not be taken with the ignorance of the masses. At least most of thetime.One recent blog post, however, says to me that his analytical prowess needs to besharpened or his objectivity has shifted to off-mode. In this article, Samdemonstrates that he has fallen for or may even be actively perpetuating every fallacy and misconception that the child allowance pundits have pulled over theeyes of the ignorant public for decades. Eh tu, Samus?The article was posted on March 25 and is entitled 
It Must Still be Purim
.Though the article sounds plausible, it contains an overabundance of factualflaws. Let's have a look at an excerpt. I will colorize the flaws and discuss them inturn:
What a week of reversals this has become! First,Binyamin Netanyahuagreed to raise child allotmentsby
a whopping NIS 1.5 billion over thenext three years
. Then,Ehud Barak won an internal Labor pollto join his party to Netanyahu’s shaky coalition.This is rich — Netanyahu as Robin Hood,
taxing the rich
to
rain money
on
the poor
, and Barak playing the sidekick to Netanyahu. It must still bePurim. Netanyahu reversed his own policy, from his time as finance minister under Ariel Sharon, of limiting
child welfare payments
. This policy, it isnow
generally agreed, was one of the key financial reforms that drovethe country’s economy forward.
Backtracking on this policy now runscounter to Netanyahu’s stated economic aims of cutting
welfarepayments
and encouraging productivity.It also undermines the social ideology behind the original move. What hehad originally corrected was the
inexplicable discrimination
in paymentsthat provided more money for the third and fourth children, and so on,than to a family’s first and second children. Obviously, this arrangement isdesirable to haredim, who have large families. But it is indefensible on somany levels — because it attaches a
higher value to one child thananother
; because
it discourages the heads
of large families, haredi andArab alike, to seek employment; because
it punishes
small families withsmaller payments per child.
 
Sam is making the following assertions:1.Child Allowance increases = more taxes on somebody 2.Those being taxed will be the rich3.The amount proposed is a "whopping" "rainfall"4.Only the poor receive child allowances5.Child payments can be construed as "welfare"6.Limiting the payments drove the Israeli economy forward7.The "large family" bill is inexplicable discrimination8.She'ar yerakosEach and every one of these assertions is inherently flawed and my friend Samhas either bought into the fallacies or is actively selling them. Now, let's find out what makes these flaws flaws:1.
taxing [the rich]
- With this term, Sam suggests that there will be additional or special taxes tocover child allowances.This is patently false.Child allowances come out of the till of Bituach LeUmi - National InsuranceInstitute (NII) - the Israeli equivalent to Social Security. Just as the AmericanSocial Security tax, the Bituach LeUmi tax has always taken a sizable bite out of everybody's paycheck. It's a little under 5% for mid-salary. Nevertheless, thispercentage has been fixed for quite some time (at least as long as I have beenhere) and the notion of changing the amount - up or down - has never been up fordiscussion. Thus, there is none and will not be any taxation beyond what isalready fixed.The issue of child allowances is only 
how much
BL money gets recirculated intothe economy and how much just sits there in their coffers. Raising the childallowances would only have the effect of slightly reducing BL's year end surplus which probably gets spent anyway on less socially beneficial issues such asadvertising, new furniture for their offices, "administative" costs, or "bonuses" forNII employees. As long as the child allowances do not exceed the BL intake
nobody is being taxed 
, poverty is reduced and money is reinfused into theeconomy,
much of it comes back
in the form of VAT taxes on goods andservices purchased with the money and personal income taxes of providers of those goods and services.Bottom line is that giving more BL money for child allowances will cost us noadditional money and is better for the economy and all concerned than not givingit and simply hoarding the money that we are paying.2.
the rich – 
 As I just wrote, the percentages of BL taxes will not change for high earners.
 
 What
may
happen is that, to compensate, the
minimum
earnings brackets forthe higher percentages may be
lowered 
as well as the minimum requirementfrom non-earners. In other words, currently the higher percentage kicks in ataround NIS 4400/ month. If you earn less than that you pay a smallerpercentage. If BL wants more money, they can't raise the high bracket. What they can do is
lower 
that threshold to, say, 4200 /month thus making low earnerspay more. Likewise they can (and will) raise the fixed minimum payment to BLfrom the current approximately NIS 130/ month to, lets say NIS 150 / month.Only non-earners pay the fixed minimum. Thus, it is actually the poor who would be taxed and not the rich.3.
rain money - 
I don't really think that the increase or NIS 93 (currently $20) can be called a
rainfall 
. Not even a
windfall 
. And, like I said, the low earners may actually needto pay in more per month. Sam should stick to the news and forget about the weather. Incidentally, here is where I will take issue on the highlighted line in hisopening paragraph which may be a fact rather than an assertion - "
a whoppingNIS 1.5 billion over the next 3 years
..." Did you say 
over 3 years
? Well that brings the annual amount down to a mere 500 M/ year, doesn't it? (Why didn't you up the ante and say NIS 3B over 6 years?) Are we forgetting that childallowances are not just for some children. They are for ALL children! So, if weassume something like 1.7 M children nationwide, we are talking about a"whopping" NIS 300 (or $75) per child
yearly
increase.I don't know about you, but somehow this figure doesn't "whop" me.4.
on the poor -
 I suppose we can substantiate this by acknowledging reports that most Israelichildren are beneath the poverty level, but still, the rich are a minority in every society. Nevertheless, they get just as much, don't they, Sam?5.
child welfare payments - 
Here Sam pulls one of the niftiest sleight of hand word tricks I have ever seen. WeEnglish speakers define "welfare" as "governemntal assistance to poor people because they are poor". So Sam has us thinking that this is what is happeninghere as well. Sam is banking on the fact that most Americans do not have aninkling on what child allowances are. This is because in America we have adifferent kind of child allowance. It is called "tax exemptions for dependents". In America somebody earns lets say $96,000 ($8000/ month) and he has 5children. The government likes the fact that he has a nice brood of productivecitizens and they recognize that these tykes are not cheap to raise. So they allow everybody - I mean everybody - to reduce their taxable income by $3500 per kid.If he is still above $78K, he pays 28% on what's left (I am making this very simple). Thus he saved 28% of 3500 - or $980 for each kid. This comes to
of 00

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