Sharing the Burden in Israel Means More Than IDF Service

The most critical aspect of equality in Israel is in the economic sphere, starting with municipal taxes.

The clarion call in the recent election for “equal sharing of the burden” shook the secular public out of its apathy and was one reason behind the Yesh Atid party’s huge success. With coalition talks now in full swing, both Yesh Atid and Habayit Hayehudi are waving the equal burden flag, knowing full well that this is what their voters expect them to achieve.

So are we on the verge of a historic breakthrough of enlisting the ultra-Orthodox into the military? Probably, but it’s clear that real equality won’t be achieved anyhow as long as the non-religious public fails to grasp that an equal sharing of the burden doesn’t just mean military service. The most critical aspect of equality is actually in the economic sphere, and that’s where Haredim are really good at manipulating the country.

Meirav Cohen also staked a claim to fame in the election campaign: She was the candidate on the Hatnuah slate who made headlines for giving birth on Election Day. Cohen serves on the Jerusalem City Council where she’s a vocal supporter of equal sharing of the economic burden. There she endeavors to identify all the breaks, financial and otherwise, allowing Haredim to enjoy benefits that are out of reach for other citizens.

One of these benefits is discounts on local property taxes. Localities in Israel collect NIS 7.5 billion in revenues each year from property taxes, according to Interior Ministry figures. This sum is reached after providing NIS 1.7 billion in discounts reducing revenues of local authorities by almost 20%.

The largest discount, apparently approaching NIS 500 million (for some reason the Interior Ministry can’t verify this figure), is based on the income test. The state grants discounts on local taxes on the basis of low family income per person. The discounts range from 40% to 80% of the tax assessment for normal families with up to six members, while larger families enjoy discounts of up to 90%. Assuming that large families live in larger homes, this means a discount of about NIS 4,000 on the annual tax bill, a sizable sum.

Besides large families receiving an extra discount, there are several other interesting aspects to the income test. One is that it’s quite easy to do: All that’s needed is to submit three pay slips or confirmation from a lawyer for someone not employed, and City Hall will approve the discount right away.

This is probably the reason why 20% of those receiving discounts for residential local taxes in Jerusalem fall under the category of income tests. Cohen discovered that the overall discount for these 20% totals NIS 116 million 37% of the city’s total tax discounts and 13% of total revenues from Jerusalem households.

The second point, and even more interesting, is that among all the criteria for meeting the income test there is no requirement of being employed. The criterion of exhausting one’s earning capacity, which the Trajtenberg Committee set as a requirement for receiving housing benefits from the state doesn’t exist for receiving a discount on local taxes.

Masterpiece of the welfare state

Paradoxically, the eligibility thresholds for a discount are much lower than minimum wage for example NIS 2,550 in income for an individual and NIS 3,824 for a couple. This means anyone earning minimum wage already earns too much to be eligible for the discount. This is obviously a masterpiece of the Israeli welfare state: Poor workers are penalized for going out to work while those choosing not to work are rewarded for staying home.

Cohen extends the paradox to point out that poor students forced to earn a living aren’t entitled to a discount, while students with rich parents maintaining them can ask for and receive one. The Interior Ministry claims that rich students need to declare they’re supported by their parents, but this is a very easy hurdle to overcome since the form is rarely ever checked.

The income test was instituted by the Interior Ministry. The interior minister, by virtue of his draconian powers, can decide every discount in local property taxes without a need for government approval or running the risk of being overruled.

About a year ago, the current interior minister, Eli Yishai, appointed the Kahat Committee that decided to increase discounts under the income test by 25%. Along the way, the committee also determined that children under the age of five will count as two people in the calculations.

“The cottage cheese protest and calls for social justice brought many issues to the surface concerning the cost of living in Israel,” explained the committee in its decision. No doubt this was precisely the goal of the social justice protest: Making sure that those who don’t work and don’t contribute receive tax discounts at the expense of those who do work and contribute. What a wonderful product of social justice from Yishai’s factory.

Cohen, as a member of the Jerusalem City Council, is alarmed that the city’s municipal tax rate is among the highest in Israel, while its municipal services are substandard. This is obviously due to the low proportion of full-rate payers in the city. The few who do pay must endure high rates to support those who don’t pay.

This is how Jerusalem’s predicament illustrates the absurdity of the municipal tax discount mechanism instituted by the Interior Ministry: The weak localities with poorer populations mainly Arab and Haredi towns are forced to grant larger discounts and suffer the cut in revenues. These municipalities, meanwhile, also spend heavily on social services for supporting these same weak communities. It’s a vise that further weakens the already poor municipalities and enlarges the gaps between them and the stronger ones. All this comes with the blessing of Eli Yishai, our interior minister.

Olivier Fitoussi