When we first made aliyah, we couldn’t believe that, not only did you have to put 60% or more down on a mortgage, but that it wouldn’t help reduce your income taxes. We kept waiting for the day when Israel would “see the light” (and indeed, now-faltering insurance giant AIG did enter the Israeli market a number of years ago, though we never took advantage of its services).

The problem in countries other than Israel is that these mortgage tax breaks encouraged citizens from the U.S. to Australia to place a disproportionally large share of their savings into property, wrote Pinchas Landau in The Post. “This was entirely rational behavior, because the tax system had been rigged to encourage them to do so.”

But when the economy crashed, property investments tanked big time and with them went trillions of dollars of consumer wealth. A more balanced investment strategy would have been far more prudent, Landau claimed. Such as the way things are in Israel.

Nevetheless, Landau’s perspective seems a bit off when looking at wealthy neighborhoods in Jerusalem and the north of Tel Aviv. Still, the vast majority of Israelis’ property holdings are much more modest.

To compare with one of the worst hit U.S. cities, Holon is not Hollywood (Florida, that is).

From a household budgeting perspective, this would seem to be good news. The drought tax was instituted this past summer as a way to encourage Israelis to use less water in the face of years of too little rain and the steady receding of the Sea of Galilee, Israel’s main water source. The tax allotted each household a certain number of cubic meters of water use per month, based on the number of family members at home. Use beyond the maximum level resulted in tripled rates.

In our house, the tax has worked wonders. By dramatically changing the way we shower and wash dishes, in particular, not only has our water bill dropped to its lowest amount ever, but we feel like we’re contributing to a vital national need.

The freezing of the tax is apparently coming from Knesset members who are giving in to their constituents grumbling about how the tax affects families and individuals but not businesses or government gardens. The media has also been highly critical. But dropping the tax is expected to create a NIS 1.2 billion hole in the national budget.

Usually I’m the first to applaud a change in the law that results in lower prices for consumers. But I’m torn here. There are times when the greater good outweighs individual financial concerns, and this clearly seems to be one of those cases.

Of course, one could argue that citizens should be cutting down on their water use voluntarily to help the country with its “liquidity” problems. But we all know that unless there’s a mountain being held over one’s head, the average Israeli is unlikely to give up a long hot shower so that there’s something left to drink in another year.

Should we start a counter protest – an anti-populist crusade to keep the tax intact?

——————-

UPDATE: since I wrote this article, the government has proposed increasing the regular water rates by up to 40% in the coming months. While this will clearly curtail excess water use, it seems to me to be vastly less fair than a tax that rewards specific behaviors. I’ll keep you posted as to what the government ultimately chooses to enact.