Netanyahu Breaks With Romney, Cuts Spending But Increases Taxes

They agree on foreign policy, but not how to handle deficits.

Image by GPO / Getty Images

TEL AVIV — As Mitt Romney was leaving Israel, the country’s Cabinet voted to approve a series of tax hikes and spending cuts today meant to manage the budget — a combination of deficit-reduction measures that would earn a veto from the presumptive Republican nominee.

Netanyahu, facing a budget deficit between five and six percent of GDP, executed across-the-board spending cuts, and raised a host of taxes and fees. The new measures, approved on Monday, will lower the deficit by 14.4 billion shekels ($2.56 million) to three percent of GDP — the government’s target for the year.

The country’s value added tax will immediately increase from 16 percent to 17 percent, Reuters reported. Additionally:

The new measures include raising income taxes by 1 percentage point on those earning more than the average salary of 8,881 shekels ($2,198) a month starting in 2013. Taxes on salaries over 67,000 shekels a month will go up 2 percentage points. Income tax rates in Israel range between 10 and 48 percent.

Romney emphasized his friendship with Netanyahu, and their agreement on a broad array of foreign policy items — but apparently the two former consultants disagree how best to handle a deficit.

“We have a friendship that spans the years,” Romney said with regards to foreign policy. “At a critical time like this, I come to learn of your perspectives and your ideas for grasping the challenges facing the region and the challenges facing the world.”

In a debate last year, Romney said he would reject any deficit reduction plan that includes tax increases, even if it was lopsided in favor of spending cuts by a 10-1 margin.