The Haaretz report this week revealing that the millionaires and billionaires who moved to Israel under the 10-year tax holiday program leave when the benefits expire could be the least surprising news of the year. They don't pay tax on foreign income and don't even have to report it to the Israeli authorities. If not for that, why would any billionaire choose to live in Israel?
With all due to respect to Tel Aviv, it’s not New York, London, or any of the world’s other billionaire barrios. We don’t have the amenities, the entertainment or the business sought by the masters and mistresses of the universe. Anyhow, what did the government expect would happen if they did come? The idea that they would invest in Israel was strangled by a law tailored to woo them, exempting them from paying taxes only on their overseas assets. In the end, their only contribution to the economy was giving a small boost to the luxury housing market.
The fact that the tax law was amended at all more than a decade ago to allow this happen says a lot about the nexus between money and politics. But it also says a lot about the outdated mindset vis-à-vis aliyah (immigration): that it must be encouraged at all costs. It's time to rethink the role of aliyah, not just vis-à-vis the 1% but the other 99% coming to Israel too.
Aliyah is a pillar of the Zionist idea and Israel should remain committed to it. Israel should and must remain a place of refuge for Diaspora Jews. But Israel is no longer desperate for immigrants. Just like it should not be enticing the rich, it shouldn't be subsidizing middle class people from the West, in the form of financial aid to immigrants or otherwise.
Decades ago, any American or European moving to Israel was making a momentous decision. Aside the language barrier and cultural problems all immigrants face, living standards in Israel were much lower. Taxes were insanely high, money couldn’t be easily expatriated, professional opportunities were limited and communication with friends and family back home was effectively limited to aerograms.
That’s no longer the case, though for Westerners, moving to Israel is still a mixed bag.
America still has it over Israel in terms of crass consumerism. Though the lifestyle gap has narrowed a lot, nobody who aspires to match or better his or her lifestyle in the U.S. will make aliyah.
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Average household income in Israel is still an uncompetitive 55% of the U.S. level, though it’s 86% of the UK average and 79% of France’s. On the upside, Israel’s tax burden is lower than America’s and most of Europe's too.
It's true that cars and cottage cheese are more expensive in Israel, but when you factor in the lower the costs of college tuition, a Jewish education for your children (after all, most immigrants these days from the West are Orthodox) and healthcare, the cost-of-living differentials narrow a lot. You can buy on Amazon and enjoy its low prices from Israel and stay in touch with your loved ones by Skype for free.
But that is not why aliyah has doubled over the last decade. Immigration from the West has remained unchanged but from the former Soviet Union, it has soared, accounting for close to 70% of the arrivals. The catch is that more than half of them aren’t regarded as Jewish under religious law. They are in a state of legal limbo vis-à-vis marriage and other issues and barring a change in the law, will remain so in the future. They are not likely to turn into happy citizens who feel they are an integral part of society.
One argument for encouraging aliyah has been to secure the Jewish majority in Israel, on the grounds that the Israeli Arab birthrate is higher than the Jewish Israeli rate. However, the rate among Israeli Jews has been rising while the rate in the Israeli Arab community has been declining. Official population projections show that in the year 2060, the Jewish-Arab balance will have moved slightly in favor of Jews.
Meanwhile, thanks to the high fertility rate, Israel is becoming intolerably crowded. The challenges of providing critical resources like water and even living space is going to get harder over time, exacerbated by the impact of climate change.
Encouraging more people to come, many of whom are going to find themselves in a personal status limbo, defies logic.
The Zionist enterprise has traditionally been about ingathering the exiles and settling the land. It was once about tilling the land, too, but we abandoned the agricultural ideal in the face of economic reality. It is a testament to Zionism's dynamism that today Israel is about startups and high-tech, not kibbutzim and oranges.
The ingathering and settlement ideals should be abandoned, too, because the reality has also changed. We don’t need to give up on idealism or ideology, just apply it to something relevant for the 21st century like social justice, environmentalism, and Jewish values and scholarship.