Tax break plan lays bare simmering rift between Netanyahu, Kahlon

At a tense cabinet meeting in mid-2011, during an unanticipated consumer protest against the price of cottage cheese, Prime Minister Benjamin Netanyahu berated his cabinet ministers for failing to think of creative solutions to bring prices down.

“[Moshe] Kahlon did great things,” he said of his then-communications and social affairs minister, who was in the midst of implementing a reform to bring down the prices of cellphone plans. “Be like Kahlon and find a solution.”

The unprecedented compliment confirmed Kahlon’s place as one of Netanyahu’s favorite ministers and spurred rumors of him being in line to take the Finance Ministry from Likud colleague Yuval Steinitz.

Five years after that fleeting prime ministerial praise, with Kahlon now serving in Netanyahu’s government as finance minister at the helm of his own party, Kulanu, a deep rift appears to have formed over who should get credit for a string of social reforms, including a plan announced Tuesday which Kahlon seems to have kept the prime minister in the dark about.

Tensions between the two go back further, though, to Kahlon’s public popularity garnered by the cellular industry reform, which eventually led to him being pushed out of Netanyahu’s inner circle and taking a break from politics.

Prime Minister Benjamin Netanyahu (right) embraces then-communications and welfare minister Moshe Kahlon, during a press conference on January 21, 2013. (Miriam Alster/Flash90)

With Kahlon’s fall from favor, Netanyahu went from lauding him as the minister behind the cellular reform to claiming it as his own achievement. When the prime minister is asked to list his accomplishments, lowering cellphone plan prices usually comes up but Kahlon’s name doesn’t.

The package of tax breaks and benefits announced by Kahlon Tuesday is aimed at increasing the net income of poor and middle-class working families by thousands of shekels a year. The NIS 4 billion a year ($1.1 billion) plan includes subsidies for after-school education, additional tax credits for working parents of children up to age 6, higher income supplements for low-income earners, equalization of tax credits for working fathers and mothers, and tax cuts on children’s clothes, shoes and cellphones.

But while the plan has won widespread praise, Netanyahu did not offer any immediate endorsement. On Tuesday evening, sources close to the prime minister said that the initiative “was in the right direction and will be approached positively,” but he gave no direct praise or endorsement.

Finance Minister Moshe Kahlon at a signing ceremony for an agreement to build thousands of new apartments in Beit Shemesh, April 3, 2017. (Hadas Parush/Flash90)

Though the proposal would constitute the government’s largest welfare package to date, the prime minister had not been briefed ahead of time or invited to the press conference where Kahlon presented the plan. Speaking on Army Radio Wednesday morning, Finance Ministry Director General Shai Ba’avad even confirmed that treasury officials had not informed the Prime Minister’s Office that they were working on the plan for the last “couple of months.”

Kahlon denied it was a snub, saying Tuesday that the initiative was “a continuation of government policy,” so that he didn’t see “anything to update anyone about. Nothing special happened here. We’re implementing government policy.”

He nevertheless took a swipes at both Netanyahu and political rival Yair Lapid, head of the opposition Yesh Atid party, when he referred — without naming names — to their former roles as finance ministers, saying that one could talk about “the fat and the thin,” or to ask “Where’s the money?” but that until today, nothing had been done for the middle class.

Netanyahu has been known to employ the parable of the thin man — the private sector — carrying the fat man, the public sector, while Lapid used “Where’s the money?” as a campaign slogan during his first bid for political office in 2012.

Coalition whip and Likud MK David Bitan attends a committee meeting in the Knesset, March 22, 2017. (Yonatan Sindel/Flash90)

Responding to being kept in the dark, Netanyahu dispatched his “bulldog” coalition chair, David Bitan, who has become known as someone who speaks for the prime minister.

Referring to Kahlon’s announcement last week of a 50 percent increase in monthly disability benefits for the more than 200,000 Israelis who receive the financial assistance, Bitan asserted, “We won’t allow any transfer of funds until the problem of the disabled is solved.

“The significant increase in benefits for the disabled is the most important thing at the moment, and until that’s implemented, there’s no meaning [to be attached] to new programs that are presented,” he said in a statement.

In the case of the disability benefits, Kahlon’s announcement was also made without coordination with the Prime Minister’s Office, after the Finance Ministry discovered Netanyahu was planning his own roll-out a few days later, the Haaretz daily reported Tuesday. Upstaging the prime minister, Kahlon went ahead and announced that plan before any one else could claim credit.

Illustrative: A demonstration outside the offices of Welfare and Finance Ministries attended by hundreds of disabled people in Jerusalem on Oct 25, 2010. (Abir Sultan/Flash 90)

Speaking on Army Radio Tuesday, Knesset House Committee chair Yoav Kisch (Likud) refined Bitan’s threat, making it clear that no plan would go through without appropriate credit to both Netanyahu and the Likud party.

“In principle this is a good plan that requires an in-depth look,” he said, “but we must remember that without the support of the prime minister and Likud, the plan cannot get the go-ahead, and Kahlon will not get the support of Likud without significantly increasing disability benefits.”

But Kahlon, who just last month was seen to have capitulated to Netanyahu’s threats to bring forward elections over the future of Israel’s new public broadcaster, made clear Wednesday that he has no plans to back down.

“The plan will go ahead as is,” he said at a press conference in his home city of Haifa.

“I am not aware of any anger and we must not allow anger over these sorts of issue. If anyone is angry that we are helping people or easing the lives of people that have been waiting for this for so many years, their anger is misplaced,” he added, in a reminder that blame can be meted out as easily as credit.