The Bottom Line / Taxing the Child

Before the ink has even dried on the state's economic plan, the government has decided to undermine one of its central planks: the equality of child allowances.

Before the ink has even dried on the state's economic plan, the government has decided to undermine one of its central planks: the equality of child allowances.

According to a proposal by Labor and Social Affairs Minister Zevulun Orlev, and with the government's agreement, it has been decided to appoint an interministerial committee to determine the issue of taxing child allowances, instead of making them equal.

Until the mid-1970s, Israel's child allowances were paid according to a system of tax deductions. Anyone who worked would receive a tax deduction according to the number of children they had. In the mid-1970s, reforms implemented by Haim Ben-Shahar scrapped the system, replacing it with straightforward payments, so that parents received allowances whether they worked or not. The connection between the benefit and labor was cut and so began the ruinous process of increasing the number of children in poorer families, and living on welfare payments instead of the fruits of labor - particularly in the Haredi and Bedouin sectors.

In the past 20 years, the Haredim have managed to increase these allowances for the fourth and fifth child, while the Finance Ministry has cut back payments for the first, second and third child. This reached a climax when the Halpert law came into effect in 2001, which boosted the payment for the fifth child (to NIS 855 a month), which is five times the allowance paid for the first child (NIS 171 a month).

The secular family, with its two or three children, has taken it hard. Not only do these families go out and work, they carry the burden of the economy, they serve in the army and they pay mortgages. Meanwhile, their tax burden has become bigger and bigger over the years in order to finance, among other things, the Haredi children (nine or 10 per family), the numbers of which have grown and grown.

The recently passed economic plan attempted to address and redress this distortion, so that each child receives an equal payment. On this, such disparate coalition partners as Shinui and the National Religious Party reached agreement, only to find Orlev now trying to impose tax on the allowance, instead of equality. Orlev contends that tax treatment is fairer, but really his proposal is worse - from both an economic and a social view. Taxing the allowance will hit the middle-income earners the hardest, those families that earn a living, that pay income taxes, whose children serve in the army. They will get less in child allowance, enabling them to give their children less - and all because they committed the heinous sin of going to work. On the other hand, the parasitic Haredi society, that doesn't work or serve in the army, wins hands down - generally they don't pay tax, so their allowances will not be diminished. So the poorer and weaker families will proliferate, sinking deeper and deeper into the poverty trap. Their offspring will live in abject poverty, they will be dependent on government handouts, on the public official, with no reasonable chance of receiving the education, knowledge and grounding that will enable them to draw themselves out, and into the world of labor and comfortable living. Is that really what Orlev wants?