A blessing in disguise?
Up until the mid-1970s, Israeli taxation worked in accordance with a deductions system. Everyone who worked had a certain sum deducted from the income tax on his earnings, based on the number of children he had. The more children he had, the less income tax he paid.
There is a good chance that MK Shmuel Halpert (United Torah Judaism) will be remembered as the bilam of the Knesset: He came to curse, but ended up blessing. That's because Halpert, with the ardent support of the other ultra-Orthodox MKs, pulled the rope too taut - until it snapped. He wanted to obtain one more benefit for ultra-Orthodox families - one too many.
Up until the mid-1970s, Israeli taxation worked in accordance with a deductions system. Everyone who worked had a certain sum deducted from the income tax on his earnings, based on the number of children he had. The more children he had, the less income tax he paid. But as part of the reform recommended by the committee chaired by Prof. Haim Ben Shahar, it was decided to abolish all the exemptions and deductions, including those that had been given for children.
In its place, came the allowances system, according to which parents receive money based on the number of children they have, whether the former work or not. This resulted in a severing of the connection between the benefit and work, setting in motion a destructive process in which people stopped working.
The ultra-Orthodox understood that this was an excellent opportunity for them: They could encourage men to attend yeshivas and kollels (yeshivas for married men), not to work, not to serve in the army and, at the same time, to get more and more money from the state, via the child allowance system. So, for the past 20 years, they have been exerting their political clout to enlarge the allowance for the fourth and fifth child, while the Finance Ministry has reduced the allowance for the first, second and third child due to a chronic budget squeeze.
Over the past two decades, the allowance for the first, second and third child has fallen by 36 percent, while the allowance for the fourth and fifth child has risen considerably, reaching a peak in a law sponsored by Halpert that took effect in 2001. This law raised the allowance for the fifth child and above to the level of NIS 855 a month - five times the amount given for the first child (NIS 171 a month). And because ultra-Orthodox families have an average of eight or nine children, it's obvious who gets the bulk of the money.
The blow to secular families, which usually have two or three children, was critical. In addition to being working families who support the economy, serve in the army and pay mortgages, the tax burden imposed on them has been increased over the years so as to finance the constantly-swelling allowances.
Therefore, from the moment the Halpert law came into effect, the government tried to defer its implementation. In December 2001, Prime Minister Ariel Sharon solemnly announced that he would annul the fifth-child allowance law, but his ultra-Orthodox coalition partners heard him and laughed. Their elite attends yeshivas and kollels and doesn't even dream of working. They live on various allocations, including child allowances, kollel payments, supports, reductions and grants. Therefore, in order to slash the allocations somehow, the government proposed that the allowances of those who do not do army service will be cut 20 percent. But that is apparently undemocratic and would probably be struck down by the High Court of Justice.
In the meantime, MKs Yigal Bibi and Shaul Yahalom (National Religious Party) grasped that the fifth-child law is also destructive for the national-religious stream of Judaism - the NRP and all those who bring up their children on Torah and work, because the law makes the ultra-Orthodox community stronger.
The solution is here in front of our noses and it can be implemented immediately - a return to the system of the mid-1970s, to the smart method that linked work and benefits. The new-old system, of deductions, will encourage people to work because that will be the only way to enjoy the benefits of a tax deduction. And it will also solve the state's basic economic problem - the low rate of participation in the workforce.
As soon as the new-old law goes into effect, all those who have not worked will have to go to work because they will no longer be able to expect the secular patsy who pays taxes to underwrite them. A Bedouin family with 15 children will know that responsibility for its economic welfare devolves solely on the family: The corruptive evasion of work will cease and the unemployment rate will fall.
Another accomplishment will be the reduction of poverty, which stems today from huge families in which the ostensible provider does not work. Only a few "prodigy" ultra-Orthodox will continue to study in a kollel throughout their lives. The others will both work and do army service.
This plan may appear too pretentious and also politically unfeasible. However, those who think so should remember that 50 percent of the children now in first grade are ultra-Orthodox and Arabs, who, in another 12 years, will have the right to vote. So time is running out to implement the change.