Tuesday, November 8, 2011

Terra Incognita: Disingenous Taxation

Terra Incognita: Disingenuous taxation
10/04/2011 22:53

The ultra-wealthy in many countries are claiming that they want to be taxed more, but are they being serious?

Talkbacks (1)
The social protesters that took to the streets in Israel this summer often spoke about increasing taxation on the wealthy, particularly the mega-wealthy who control large parts of Israel’s economy. With the economic crisis that has swept the world this has become a common theme in many countries. Either out of self interest, to deflect criticism, or due to sincere belief that they are under-taxed, some wealthy tycoons have come forward in France and the US, demanding to be taxed more. It is worth examining a few cases of the “tax me more” crowd in order to understand why their claims are partly disingenuous.

American billionaire Warren Buffet in particular has gotten a lot of attention for his call for a new tax on the wealthy. It is his latest ploy to keep himself a media darling and add to his fame as the “Oracle of Omaha.” In a New York Times op-ed entitled “Stop Coddling the Super Rich,” he claimed that he and his “mega-rich” friends were left “untouched” by the latest pain being felt by the American taxpayer. He explained that last year “what I paid was only 17.4 percent of my taxable income – and that’s actually a lower percentage than was paid by any of the other 20 people in our office.

Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent” (New York Times, August 14) Buffet went on to detail how those earning salaries on a payroll tended to pay much a much higher percentage of their income in taxes than the super-rich.

He noted that 88 of the top 400 income earners in the US reported no wages at all and thus paid no payroll taxes. The Oracle suggested raising taxes on the 236,000 Americans who earn more than $1 million a year in income.

THE BUFFET analysis of the tax system’s inequality has an allure. It doesn’t make sense that someone who earns a good salary, such as $100,000 a year, pays a higher percentage of their income than someone whose income was $1 million from their investments.

But there Buffet’s claim that he pays less tax is extremely disingenuousness. He pays less tax primarily because he has always structured his income to pay less tax. If he wanted to pay his fair share of taxes, like his employees, he could simply pay himself his income as a salary, and thus contribute upwards of 25% of it in taxes. He has always chosen, like most of the mega-wealthy, to retain his income in investment vehicles, such as his own holding company, Berkshire Hathaway.

John Edwards, the 2004 vice presidential candidate, was another disingenuous tax promoter. He spoke often of the “two Americas... with two sets of books: one for those at the top who get all the breaks, and one for the rest who do all the work.”

He argued that “First, we must write a firm principle into the tax code: the wealth of the wealthiest can never be taxed less than the work of the rest of America. Today, wealthy Americans can shelter unlimited amounts of unearned (investment) income from being taxed at the rate working Americans pay...That’s wrong.” But it turns out Edwards was the king of the tax shelters. In one year he took a salary of only $360,000 from his law practice, but received $26 million in income from special distributions.

Now several wealthy Frenchman have stepped forward to argue for a Buffet tax of their own. Maurice Levy, chairman of the advertising firm Publicis, declared that it is “only fair that the most privileged members of our society take up a heavier share of this national burden... I do not love taxes, but right now this is important and just.”

The billionaire heiress of L’Oreal also chimed in, encouraging the government to tax her more.

It all sounds very nice, but the reality is that it will always be hard for the government to tax the very wealthy. Most wealthy people either inherited their money or they are owners of major businesses. Their wealth is therefore either in a bank account earning interest, or in assets and investments. Enacting a “wealth tax” is difficult. This is always the irony of wealthy people like Mr. Buffet encouraging higher taxes, they want higher taxes and they know that those taxes will never reach them, because the government can’t simply order Mr. Buffet to turn over 10% of his shares in Berkshire Hathaway every year.

The higher taxes debate will always falter on this problem. The government wants to tax people that it can find; going after vague investment accounts, structured partnerships, trusts and overseas numbered accounts is not something tax authorities excel at.

Since, in the case of each mega-wealthy person the way their wealth is structured is unique, it is hard to levy a flat tax on them. However, raising the taxes levied on salaried employees, say people making over NIS 10,000 a month or NIS 80,000 a month, is easy because the taxes are generally collected or withheld at their source, before the wage earner even receives the income. The Warren Buffet Tax and the French wealthy calling on the government to tax them is primarily a ploy to make them look like better people and to encourage the public to continue believing in the empty slogan; “tax the fat cats.”

The writer has a Ph.D from Hebrew University and is a fellow at the Jerusalem Institute for Market Studies

Terra Incognita: Acceptance Committees

Terra Incognita: The acceptance committee conundrum
10/22/2011 21:37

It should not be legal for kibbutzim founded many years ago to be allowed to uphold an institution that is considered illegal in other communities that were founded more recently.

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In March 2011 the Knesset passed a law allowing small rural communities of up to 400 households in the north or south of the country to establish acceptance committees, or to maintain existing ones.. The final version of the law declared that “the acceptance committee will not refuse to accept a candidate for reasons of race, religion, sex, nationality, disability, personal status, age, parenthood, sexual proclivity, country of origin, opinions or political affiliation.”

But since the passage of this legislation, many groups, particularly those involved with the human rights lobby in Israel, have made a commotion. They threaten to petition the Supreme Court, claiming that the law is indirectly, or directly, aimed at discriminating against Arabs.

The Gush Shalom (“Peace Bloc”) organization posted on their website that “the purpose of this piece of legislation is manifestly clear: to provide a legal basis for the establishment of exclusively Jewish communal villages from which Arabs would be excluded, thus bypassing the court rulings prohibiting discrimination against Arabs.”

Writing in Haaretz, Dmitry Shumsky claimed: “There is no choice but to see the Acceptance Committee Law for communities as an expression of the anachronistic return to the open and callous ethno-centric nationalist racism of the old Europe of the previous century.”

Shlomo Molla, the lone Ethiopian MK, claimed the law’s wording, which permits rejecting applicants who do not meet certain social and cultural criteria, would result in discrimination against Ethiopians as well. Prof. Mordechai Kremnitzer, vice president of research at the Israel Democracy Institute, has argued that the law is “neither Jewish nor democratic.”

In the months following the passing of the law, several other news items have appeared that may have a bearing on the case.

In September, Ahmed and Fatina Zabeidat were finally allowed to take over a plot of land in the community of Rakefet in the Galilee. Five years ago they were rejected by the community’s admissions committee; Fatina was found to be “too individualistic” and Ahmed was said to “lack personal sophistication.” They were deemed “socially incompatible” with the community.

After years of their case wandering its way through the Israeli court system with the support of a number of human rights organizations supported by the New Israel Fund, they won their case.

In September, Kibbutz Ein Gedi, near the Dead Sea, announced that it was accepting its first new members in 15 years. The kibbutz had declined so many applications over the years that only 176 members remained, and their average age was 62. For the new members to be accepted a total of two-thirds of the existing members had to vote for their acceptance. The situation in Ein Gedi is similar to that of most kibbutzim in Israel, which have seen their populations age and their numbers decline since the 1980s.

WHAT IS interesting about the stories of Kibbutz Ein Gedi and Rakefet is that both communities maintain longstanding acceptance committees. Rakefet’s has apparently been in place since its founding in 1981, and Ein Gedi’s since 1956.

In fact, it turns out that all the 500-odd kibbutzim in Israel have acceptance committees, as do many other communities, such as moshavim.

It might be fair to estimate that approximately 1,000 communities around the country currently use acceptance committees. Yet the law defining the legality of such committees was only passed in 2011. Why the contradiction? Why the sudden outrage about this law? In reality, the very foundation of Israel is, for better or worse, grounded in the notion of the acceptance committee.

From the very beginning, all communal settlements in Israel were heavily “socialized,” with all sorts of committees and rhetoric about the “social compatibility” of residents.

Acceptance committees have long been part of the social fabric of this country. From tiny settlements in the West Bank established after 1967 to new communities in the Misgav regional council in the Galilee to the oldest kibbutz in the country, the institution has always existed in Israel.

The acceptance committee has also been one barrier preventing the integration of many Jewish (not to mention Arab) groups into the rural environment. It isn’t the main barrier, though.

Many Mizrahi and Sephardic Jews live in urban areas because the government settled them there; they never even thought of how they might like to live on a kibbutz.

The Arab population of Israel, much of which lives in semi-rural villages, has never wanted to move to nearby Jewish communities, preferring to simply expand their existing villages.

The hypocrisy that exists in certain sectors of Israeli society raises a fake outrage about a “segregation” law, a law that merely enshrines what has always existed. The notion of the acceptance committee and all its pseudosociological findings of “social unsuitability” smacks of elitism and in many cases may hide racism behind “cultural” excuses. But this is not the main problem.

The central issue is that when the Supreme Court considers this law it should consider whether the committees currently used by 1,000 communities in Israel are also valid. It should not be legal for kibbutzim founded many years ago to be allowed to uphold an institution that is considered illegal in other communities that were founded more recently. Either all be allowed to have acceptance committees or none should. It shouldn’t be considered “racist” for some and not for others.

The writer has a PhD from Hebrew University and is a fellow at the Jerusalem Institute for Market Studies.

Terra Incognita: Robert Ford's Heroic Diplomacy

Terra Incognita: Robert Ford’s heroic diplomacy
10/25/2011 23:09

US envoy to Syria's personal investigation of abuses and his shows of support for protestors is a welcome sign.

The American decision to withdraw Ambassador Robert Stephen Ford from Syria should raise eyebrows, not only because it represents a fundamental fear for his safety, but also because of what he has come to represent.

Through Ford’s courageous use of personal diplomacy, travelling to the most dangerous areas of Syria to show support for the protestors, he has carved out a niche for himself in the region, defying stereotypes about what diplomats can and should do.

On the face of it the ambassador’s position and biography don’t necessarily lend themselves to this type of action. A career diplomat , Mr. Ford, born in Denver, Colorado in 1958, is considered one of the foremost Arabists in the State Department.

He served in the Peace Corps and obtained a BA and MA from Johns Hopkins University before entering the US foreign service in 1985.

Since 1985 he has been posted throughout the Middle East, most notably in Iraq after the American invasion and in Algeria from 2006 to 2008.

His posting to Syria in late 2010 was considered important because the US had withdrawn its ambassador to Syria in 2005 after the assassination of Rafik Hariri, the Lebanese prime minister.

Ford’s work in Syria has almost all taken place against the backdrop of the “Arab Spring.” During his confirmation hearings with the US Senate, before being posted to Damascus, Ford had promised that “unfiltered straight talk with the Syrian government will be my mission priority.”

It is interesting that through June of 2011 he was in fact criticized for doing little to show support for the protestors that Bashar Assad’s regime was gunning down in the streets. Richard Grenell, writing at the Huffingtonpost.com, asked, “Shouldn’t Ford be calling attention to and showing the violence coming from Assad’s government?” He also thought the US should withdraw its ambassador to protest the crackdown.

In early July, however, Ford made an important and visible statement against the actions of the Syrian regime when he visited Hama with the French ambassador, Eric Chevallier. After his factfinding trip, which brought temporary respite to the besieged protestors in the city, he told media that “the violence that the Syrian government is inflicting on Syrian protesters, from our point of view, is grotesque. It’s abhorrent.”

He also articulated a new type of “muscular” diplomacy: “I don’t particularly care [if Syria is angry], because we have to show our solidarity with peaceful protesters. I’d do it again tomorrow if I had to... I’m going keep moving around the country. I can’t stop.”

Since July, Ford has been active in articulating opposition to the Syrian regime’s methods and showing support for those who oppose Assad. In September he travelled to meet with Hasan Abdel-Azim, an opposition figure. Pro-Assad protestors surrounded the ambassador’s vehicle, pelted him with tomatoes and eggs and temporarily interdicted his motorcade.

Stephen Ford is not the first US diplomat to find himself in harm’s way. One hundred and eleven US diplomats have been murdered or come to a bad end since 1780. Many died in Pakistan as a result of terrorism and most were not of ambassadorial rank.

One of the most famous cases of an American diplomat being murdered while at his post was that of Vice-Consul Robert Imbrie. Imbrie was beaten to death by a mob in Teheran in 1924 after being mistaken for a member of the Bahai faith. Local Islamists had whipped themselves into a rage, convinced that Bahais had poisoned a well .

Cleo Noel, US ambassador to the Sudan, was killed by Palestinian members of Black September in 1973. The US ambassador to Beirut, Frances Meloy, was murdered in 1977. Adolph Dubs, the US ambassador to Afghanistan was killed in 1979 when terrorists tried to kidnap him.

Ford’s departure from Syria is apparently based on credible intelligence that certain elements wanted him to meet a similar end.

The kind of blunt, heroic diplomacy that Ford has come to represent is a departure from the long-standing practice of US State Department functionaries, especially those considered Arabists, of toeing the line when it comes to dictators and human rights abuses.

Especially in the Middle East, US diplomats have been stricken with what is often termed “clientitis”; staying in a country too long and becoming too attached to it, rather than representing US interests.

US ambassadors in Saudi Arabia have been loathe to condemn killings in the Qatif region, in the Gulf states the US representatives do little to speak out on the mass human rights abuses, which amount to slavery, against foreign workers.

In Iraq, where it has just been announced that Iran and Turkey are both cooperating to suppress the Kurds, including incursions into Iraq, the US has remained silent.

There is obviously a question as to what constitutes going beyond the diplomatic mission’s purview, such as meeting with illegal opposition figures. But Mr. Ford’s personal investigation of abuses and his shows of support for protestors is a welcome sign, one that the US State Department might consider repeating in the future.

The writer received his PhD from the Hebrew University of Jerusalem and is a fellow at the Jerusalem Institute of Market Studies.

Terra Incognita: Disgraceful Behavior

Terra Incognita: Disgraceful behavior
11/01/2011 22:53

The desecration of Sammy Ofer’s grave is but the latest in a shameful wave of hate directed at an Israeli success story.

Last week, shipping tycoon Sammy Ofer’s grave in Tel Aviv’s Trumpeldor Cemetery was vandalized. It could have been worse, to be sure. The vandal – no, the savage – drew only a small “price tag” on the grave. But the act was merely the latest in a series of disgraceful behavior directed at the Ofer family over the past six months.

By most accounts the Ofer brothers, quiet and unassuming but massively wealthy, were decent men. Sammy and his brother Yuli were born in Rumania in the early 1920s. Their family came to Mandatory Palestine in 1924 and resided in Haifa. Both men served in the Israeli army, Sammy in the nascent Navy because he had been in the Royal Navy, and his brother in the army. Sammy bought his first ship in 1950 and after his brother left the army, mustering out as a Major, the two men founded a shipping company which would become the basis for the Ofer Brothers Group.

As Nehemia Shtrasler of Haaretz tells it, Sammy Ofer made his bones abroad.

“The truth is that Ofer made his fortune abroad, and only afterward returned to Israel in order to invest the profits here....He left Israel in the late 1960s and went to live in London, where he founded a shipping company that was very successful. He took great risks, took out huge loans and purchased ships during times of crisis, when everyone was afraidli success story.�㛲���ᦗ�Last wl prepared in times of prosperity.”

With his brother Yuli, he acquired other assets besides shipping, including Bank Mizrahi, several chemical and oil businesses and dabbled in real estate. The Ofer brothers became Israel’s wealthiest people and grew their shipping business into one of the biggest in the world. They also gave handsomely to charity.

BUT SOME Israelis, it seems, hated them and felt suspicious of their wealth. They were the rich tycoons, the ones the protestors blame for the high rents and cottage cheese prices. They were the evil capitalists.

In May, the US State Department slapped sanctions on seven companies, the Ofer brothers’ among them, for dealing with Iran and barred them from receiving US export licenses and receiving loans of over $10 million from US financial institutions.

This revelation was accepted without question by the Israeli public, media and politicians, all of whom brandished their knives to strike down the company that could now be accused of putting profits above patriotism.

Israel’s politicians and media experts didn’t bother to digest what the Ofer brothers were accused of – the State Department claimed they didn’t do due diligence when they sold a tanker they owned jointly with another company to a straw company that was in fact acting on behalf of Iran.

Yossi Melman at Haaretz wrote that “the Ofer Brothers Group may be scurrying into damage control in Israel, Singapore, London and Washington, after the United States blacklisted it for trading with Iran, but Israel seems to be doing nothing to enforce international sanctions on Iran.”

Israel’s politicians across the political spectrum demanded an immediate investigation by the attorney-general and Knesset. Shelly Yacimovich of Labor claimed “the prime minister must protect Israel’s economy against such an occurrence and pursue justice against the companies’ owners.” A special Knesset panel was convened to investigate the supposed wrongdoing.

But then the knives were sheathed. The Knesset committee disappeared. The attorney- general did nothing.

Sammy Ofer died in early June. One Obituary read: “Israeli billionaire involved in Iran dealings dies in Tel Aviv.” At his funeral, his son Idan said, “for him, Zionism wasn’t merely an ideal, but a commandment to action.” Sammy’s brother Yuli died in September. Conveniently, the next day the press reported: “US drops Ofer brothers company from Iran Sanctions List” (Haaretz, Sept. 13).

Even though they were in their late 80s, the controversy may have driven the poor men to an early grave.

One thing that’s clear regarding the ordeal the Ofers were forced to go through is that, as far as I can tell, not one politician or media personality has apologized. Why should Shelly Yacimovich, Aryeh Eldad or Nachman Shai, among the accusers, say “we were wrong, it turns out that we jumped to conclusions”?

No, it is easier to have a savage outburst, to accuse men who gave their entire lives to Israel, who devoted themselves not only to the defense of the country but also to making it a world financial power, of wanting some piddling profit from the sale of one rusty tanker to an Iranian straw company.

One wonders, if the Ofers had simply left Israel in 1960 and not returned, building their fortune abroad, where all their money was made anyway, would not their lives have ended differently?

Sammy’s grave would probably not have been vandalized, at least not by his own people. Furthermore he wouldn’t have been hounded to his dying day.

Mr. Ofer couldn’t even donate money in Israel without people castigating him for it.

In 2006 when he had given money to the Tel Aviv Museum of Art he was slandered and libeled so much he withdrew the donation, writing, “Sorry for wanting to contribute, an open letter to the art lovers in Tel Aviv and Israel.”

That is a sad testament to the place the Ofers called home. Why is that? Why can’t Israelis look up to men like the Ofers, see success and feel proud? The Ofers represented one of the best success stories in the region. The country should have produced ten thousand more Ofers rather than producing ten thousand more critics capable of unfounded hateful accusations.

There should be outrage over the desecration at Trumpeldor Cemetery, just as there is outrage at all these heinous “price tag” attacks.

The writer has a Ph.D from Hebrew University and is a fellow at the Jerusalem Institute for Market Studies.
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Terra Incognita Misbehaving Sciences

Terra incognita: Misbehaving sciences?
By SETH J. FRANTZMAN, Jerusalem Post
11/08/2011 23:42

In light of recent incitement by lecturers, it' s important to examine the freedom of expression and the “right” of academics to engage in extremist speech.

Two weeks ago it was reported that State Prosecutor Shai Nitzan had asked police to investigate Ben-Gurion University chemistry lecturer Eyal Nir for incitement because of a call he made to “break the necks” of a right-wing fringe group. The same week, Kent State University Professor Julio Pino yelled “death to Israel” during a lecture by Israeli diplomat Ishmael Khaldi. It is important to examine not only the merits of these cases but also the wider context of freedom of expression and the “right” of academics to engage in extremist speech while at the same time enjoying the presumption that their work with students remains unbiased and uninformed by their sometimes radical views.

The Nir incident took place in June, 2011, after Israelis marched through Jerusalem on Jerusalem Day. Some of the fringe part of the march included a group that chanted anti- Arab slogans and whose comments were posted on YouTube. Nir saw the YouTube video and linked to it on his Facebook page, with a comment in Hebrew that “gangs of bandits are swarming our country. I call on the world to come and help break these scoundrels’ necks.”

The comment drew criticism and numerous comments on Facebook but Nir stood by what he said. He wrote that the gang in question consisted of a few bullies and that they must be prevented from carrying out their threats.

“I believe my cry to stop them is reasonable,” said Nir.

It is worth noting that Eyal Nir is no stranger to radical politics in Israel. In 2010 he was photographed being arrested by the IDF during a protest at Nabi Salah in the West Bank. Blogger Alison Ramer wrote that “Nir was taken into an army jeep for insulting a soldier with a racial slur.”

Ben-Gurion University has seemingly stood by Nir, noting in a statement: “Dr. Nir published his comments as a private individual, on his personal Facebook page. The university does not take a side in the matter, and therefore justice should be sought in appropriate legal forum.”

Others took issue with the comments immediately, establishing an online petition to have him fired.

THE PROBLEM with Nir’s comments is not whether they constitute incitement under Israeli law, since the incitement law is, in my opinion, flawed. The issue that should be raised about Nir’s diatribe is how it impacts the university environment he teaches in. A review of cases abroad shows that most faculty members who have been fired for things they said had their jobs terminated only in connection to comments made in class or which were directly related to campus activities.

For instance, a Leeds University lecturer was suspended and took early retirement when he gave an interview to a student newspaper suggesting that Africans were less intelligent than Europeans. There do not seem to be any incidents of faculty members having been fired for statements made outside of the university setting.

However, Peter Van Onselen, writing in The Australian, recalled that a colleague once complained to his university about a column he had written. He took the “view that it brought the university [a previous employer] into disrepute, and requested that I be reprimanded for doing the university’s reputation damage,” wrote Onselen.

Do Nir’s comments bring Ben-Gurion University into disrepute? Considering the fact that the university has no shortage of radical leftists who do not hesitate to offer their opinion that Israel is a colonizing, racist country, it would seem that the university’s reputation could not be tangibly changed by these newest comments.

The story of the “death to Israel” comment by Julio Pino, a tenured professor at Kent State, is more nuanced. Pino is a native of Cuba and a convert to Islam. There is some irony in the fact that the visiting Israeli diplomat who drew Pino’s ire is himself a Muslim (Mr. Khaldi is Israel’s first Beduin deputy consul). His outburst took place on campus. Kent State President Lester Lefton condemned Pino’s outburst, however according to the American Association of University Professors, “Calling out a political slogan during a question period falls well within the speech rights of any member of a university community.”

Most respected academics know the value of having their students believe classes are not biased against certain individuals due to race, creed or gender. Since national-religious students in Israel clearly constitute a creed it is certainly possible that these students might feel that Nir’s “break their necks” comment was directed at them and would feel uncomfortable attending his classes. How can one study in such a hostile environment? Could a black student feel comfortable in a class where she knew that the lecturer had written in an op-ed that black activists should have their necks broken? Furthermore, why do academics enjoy a special type of free speech that no other occupation enjoys? Those defending these “outbursts” seem to misconstrue the notion of academic freedom, which means a freedom to research, with the idea that academics have the right to behave in the lowest manner possible, using outbursts that befit the village drunk more than they do a holder of a doctorate. When an academic’s behavior is as savage, unrestrained and brutish as that of someone leaving a pub sloshed at three in the morning, one wonders where our notion of what constitutes acceptable behavior, and speech, went wrong.