A Small Step Toward Distributive Justice in Israel

Commercial and government-paid municipal taxes are among the factors allowing wealthy communities to get stronger, while decreeing life on the margins for most Israeli communities.

Moti Milrod

The income earned by local authorities from commercial real-estate taxes (arnona) is pretty congruent with the economic and social gaps in Israel. This income distribution does not only reflect existing differences, but contributes to their perpetuation.

The treasurys proposal for differential budgeting, with the states funding for welfare and educational services to be determined by a towns financial strength, is a small step toward correcting distortions, some of which became fixed decades ago.

According to the Central Bureau of Statistics, in weaker locales, municipal income averages 1,600 shekels ($408) per resident, compared to 5,250 shekels ($1,338) per resident in stronger towns and cities. These gaps, which stem primarily from differences in commercial arnona, are increasing. According to data published in Haaretz, towns in the three lowest socioeconomic deciles get only 17 percent of their income from commercial real-estate taxes, compared to 48 percent in deciles 8 and 9, and 64 percent in towns in the uppermost decile.

Commercial arnona pretty much determines the level of services residents get in the realms of education, welfare, culture and environmental protection. The ability of a local authority to benefit from this resource and utilize it to invest in various infrastructures is connected not just to the municipalitys management abilities, but also, perhaps primarily, to its municipal boundaries. Two types of towns in particular suffer from this inherent, state-sponsored inferiority – development towns and Arab towns.

For example, the income from commercial arnona comes to 460 shekels per capita in Netivot, compared to 1,375 shekels in the Sdot Negev Regional Council, and 5,978 shekels in the Merhavim Regional Council which surrounds it. The gap between Kafr Qasems income from arnona and that of nearby Rosh Haayin is 200 percent. To this inequality one must add the arnona payments made by government ministries, particularly the defense ministry, which are also not distributed fairly.

Commercial and government-paid municipal taxes are among the factors allowing wealthy communities to get stronger, while decreeing life on the margins for most Israeli communities. The treasury proposal is one way to deal with this situation, together with adjusting municipal boundaries or revamping the way arnona income is distributed.

One can understand why the wealthier cities and regional councils object to the treasury proposal, but one cannot accept their objections. The proposal does not seek to take arnona paid by residents of one city and give it to other cities, but to divert some of the governments portion of welfare and educational funding to weaker communities. The government is responsible for reducing social and economic gaps, to which the existing division of arnona income contributes. After decades of delay, its time for more just disbursements.