Israel - stepping over the edge?

Israelis Hate Being Called Nazis, So They're Banning the Word "Nazi" (Click on this heading to read more)

Call Israelis "the strongest democrats in the Middle East." Call them complex and fractious. Call them militarized tools with racist streaks who expand their territory at the expense of peoples they consider inferior. Only don't call them Nazis, because they will totally throw you in jail!
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Israel was founded, in part, to give Jews of the world a safe haven from the sort of anti-Semitism that found its lowest expression in the Nazis' extermination programs. Since then, what with their universal military service and wars and secret assassination squads and crazy settlers and bizarre policing practices of Palestinians and their own Arab citizens, Israelis have had to suffer through every undergraduate activist's discovery of reductiveness, dramatic irony, and shock value: "The Nazi-haters are acting like Nazis!"
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It's a provocation the Jewish State is one step closer to banning entirely, the New York Times reports:
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Parliament gave preliminary approval on Wednesday to a bill that would make it a crime to call someone a Nazi - or any other slur associated with the Third Reich - or to use Holocaust-related symbols in a noneducational way. The penalty would be a fine of as much as $29,000 and up to six months in jail.
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Weirdly, Israelis who actually have some experience with Nazis are not so sure that "Never Forget" and "Don't Fucking Say That or We'll Arrest You" are entirely compatible: