The much anticipated economic plan of the new Netanyahu government was announced today, with tax cuts and privatization taking a leading role. While the plan calls for  promoting jobs and halting unemployment, the cornerstone of the plan is tax policy and structural reform.

Netanyahu laid down the gauntlet by saying that by lowering taxes, Israel will become of of the world’s most attractive investment destinations. As the rest of the world is marching towards socialism, Israel appears to be headed in the other direction, embracing free market principals that have led the world to unseen prosperity over the last 28 years.

According to Globes: “Netanyahu and Steinitz also announced decisions on the structure of tax cuts between 2009 and 2016, which focuses on the middle class. Netanyahu said, “The middle class bears the heaviest burden, and as a complementary measure, we’ll promote the abolishing of exemptions and improve collection. Excellent people are working there, but it’s no secret that the institution has been traumatized.”

Netanyahu’s tax plan calls for reducing the company tax rate to 18% by 2016 and reducing the maximum income tax rate for individuals to 39%.

Netanyahu added, “The individual tax rate will fall in 2010. We must distinguish ourselves from the world, so that everyone sees that we’re the most attractive. We’ll we’ll attract entrepreneurs and capital because the company tax will fall.”

Let’s see if once again Netanyahu’s policies can save the Israeli economy from the abyss, and be seen as a model worldwide, that lower taxes, privatization and individual land ownership are the cornerstones to real economic growth; and not by government printing presses working 24/7. to artificially stimulate the economy while bankrupting future generations.

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Fresh polling coming on the heels of the war with Hamas shows that former PM Benjamin Netanyahu, has continued to hold a strong lead over his competitors.

According to a poll done by Globes: “…after the end of Operation Cast Lead in Gaza shows the right continuing to strengthen and leader of the opposition Benjamin Netanyahu consolidating his status as prime minister in waiting. If the elections were held today, Likud, according to the survey, would receive 32 out of the 120 Knesset seats, while the right wing block as a whole would receive 69 seats. This is all before campaigning, suspended by the war, begins in earnest.

Although the Likud has dropped one seat since last week’s poll, the gap that Netanyahu opened up on the ruling parties before the war has been maintained. Not only has Kadima, the ruling party, not benefited electorally from the war, but it even lost ground, and is down from 22 seats a week ago to 21 today.”

This is good news for the Israeli economy. A strong coalition led by Netanyahu will be able to pull Israel out of the economic crisis. Netanyahu’s approach of lower taxes, privatization and incentivizing entrepreneurs is the proven way to create growth. Not more government interference.

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For the first time in months we have a real proposal that will help extricate Israel from the economic crisis. Instead of another proposal calling for spending billions of taxpayer dollars to build bridges that aren’t needed, PM wannabe Benjamin Netanyahu, has called for a comprehensive overhaul in the tax code calling for steep cuts in both personal and more importantly corporate income taxes.

Finally we have someone who understands that if citizens can keep more of there money, they can then invest, spend and save it according to their needs. The problem with all these other proposals is that with big time increases in government spending you end up taking money from individuals and they have less to create new wealth.

According to Globes: “Netanyahu said, “Over the course of four years, we will lower the top personal tax rate from today’s 46% to a level of 35%, and we will lower the top corporate tax rate from 27% to only 18%.”

Netanyahu added, “The tax cut will be spread over the entire term, and lead to everyone paying about 20% less than what they pay today”.

He also called for more privatization of government held monopolies like the electric, and water companies as well the ports.

With the world on fast track to socialism, it’s so refreshing to hear a leader speak with common sense, and a firm knowledge of what will actually save the economy.

I know that certain newly sworn in presidents believe that we all need to suffer in order to fix the economic issues that we all face, and that ‘greed’ was what caused all these problems, but ‘greed’ is what powers the economy forward. It’s not a bad thing but a good thing. the greed that Netanyahu talks about is about letting you and I keep more of what we earn, incentivize us to make more so that w can better our lives. Is that Greed? The fact is that as personal incomes rise, so do donations to charities. It appears that there is a correlation between making more and giving more. That doesn’t sound much like greed to me, and that’s the kind of personal sacrifice that should be encouraged.

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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.

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The entire interview with Cliff Goldstein of AMIDEX is part of our new subscription newsletter, Israel Opportunity Investor. You can find out more about the product and the opportunities we cover at www.israelnewsletter.com.

Can you tell us how AMIDEX got started?
Cliff Goldstein: I’m a lawyer by trade. In 1998 I saw some really compelling advances being made by Israeli technology companies. I decided to go to brokerage firms to see if I could find a way to invest in this ingenuity. I was specifically looking for a mutual fund that invested in Israeli companies. There wasn’t anything out there. After speaking directly to brokers, it was also clear to me that brokers themselves weren’t really knowledgeable about what was occurring on the ground in Israel. I then went to Israeli Economic Mission to the U.S. to complain about the lack of retail investment opportunities.

Why aren’t there Israeli investment products in the U.S.?
CG: I think part of the problem was that there was no benchmark for those Israeli companies trading in the U.S. There is really no comprehensive index because a significant portion of Israeli marketcap trades in the U.S. and in Tel Aviv. There were indices for the Tel Aviv Stock Exchange (TASE) but not one that included New York as well.We decided in 1999 that we could address this barrier and create our own index that included both U.S. and Tel Aviv listed Israeli companies. As this was a time before Exchange Traded Funds (ETFs) had really developed, we borrowed from the protocols developed by the WEB products. We created an index that included 60% of total Israeli marketcap. To get here, we needed 35 companies to get 60% of the total universe. Most of the companies in the initial index were Israeli companies that traded in the U.S. Given what’s transpired over the past couple of years in the U.S. and the growth of Israeli  businesses, we now see the inverse: about 60% of our firms trade in Tel Aviv and the minority in the U.S. It was these 35 companies that comprised the original AMIDEX35. We could then back test historically and when speaking to investors, this really looked good from a performance point of view. When we launched the actual fund in June of 1999, 68% of the companies traded in the U.S. and the remainder in Israel. We thought that the volatility and risk of political disruption would be highest in Israel so we were comfortable with this mix. It’s interesting to think that soon after we had the meltdown of the dot com boom. (Continue »)

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