Negative Income Tax: No Panacea for the Poor

The institution of negative income tax will extract only 8,000 families from poverty out of 470,000 poor families in Israel, according to a study conducted by the Macro-Center for Political Economics and the Friedrich-Ebert-Stiftung fund. In other words, it will help just 1.7 percent of these families, the researchers say.

The study also argues that only 2.2 percent of the families that meet the criteria for negative income tax are defined as living below the povery line. It also found that 15.3 percent of the workforce or 1.7 million people will be eligible for the coveted treasury checks. The study's leader, Roby Nathanson, suggests that since the program will do almost nothing to check poverty, other steps must be taken to help the poor.

Uriel Lynn, president of the chambers of commerce, complains that the program is costly - about a billion shekels a year - considering that its efficacy is scant. He advocates lowering health tax and National Insurance Institute payments instead, and says that negative income tax will achieve nothing but to create a whole new group of people with their hands out. "It will discourage work, not encourage it," he says. Officially, though, the Manufacturers Association and Histadrut labor federation support the reforms, whatever their limited effect.