Following marathon debates and threats to break apart the coalition, the Cabinet approved a budget Wednesday for the next two years. The budget passed by a wide margin, with 26 ministers voting for it and only four opposing.
Prime Minister Binyamin Netanyahu and the Finance Ministry spend the last several days meeting with ministers who opposed the budget, and in many cases making changes in order to reduce opposition.
Netanyahu and Education Minister Gideon Saar reached an agreement after the former agreed to increase funding for the school system. Netanyahu also reached an agreement with Tourism Minister Stas Misezhnikov of Yisrael Beiteinu regarding cuts to his ministry's budget. Both Saar and Yisrael Beiteinu voted for the budget.
Shas Votes Against Because of Vegetable Tax
Those who voted against the budget were the Shas party's four ministers: Internal Affairs Minister Eli Yishai, Minister of Housing and Construction Ariel Attias, Minister without portfolio Meshulam Nahari, and Minister of Religious Services Yaakov Margi. Yishai explained, “We voted against the budget because of the tax imposed on fruits and vegetables, and the overall tax increase.”
"These clauses will hurt the weaker sectors of society, and it's a shame that the Labor party voted to support the budget nonetheless,” he added.
The latest changes include a 2 percent reduction in income tax after the proposal called for only a 1 percent reduction. However, a hike in the value added tax (VAT) of 1 percent remains in effect - for 18 months - in a move that will hurt lower income sectors more than others.
Netanyahu, when he was Finance Minister several years ago in the Sharon government, began a long-term program of slashing VAT from 18 percent to the present 15.5 percent, a move that was credited with helping spur economic growth.
Raising the tax could dampen consumer spending during the recession. The government is counting on a “trickle down” policy of helping businesses to increase investments to create more jobs.
The budget calls for a 3 percent increase in spending, including outlays for social welfare programs that originally had been cut, and the budget deficit will balloon to at least six percent of the gross domestic product.