When the cabinet unanimously approved the outline of the two-year budget for 2017-2018 after a marathon 22-hour meeting earlier this month, the plan – which must still pass three readings in the Knesset – included many projects that will directly affect Israelis in matters of education, health, transportation, and taxation.
Come the fall, when the Knesset resumes its activities, the two-year budget will be front-and-center. As it stands, the 2017 budget is set at NIS 359.7 billion ($94.1 billion), and NIS 376.7 billion ($98.8 billion) is allocated for 2018, according to the Finance Ministry.
Many of the allocations will likely be revised — whether openly, ahead of the Knesset votes, or in the ceaseless money-moving maneuvers in the Knesset’s Finance Committee. And we have yet to see how effectively those proposed projects that are approved will be implemented. In the interim, though, here’s a look at a number of intended measures that may prove relevant to the personal and financial lives of Israeli citizens, and of some Americans.
Taxation on a third apartment. In a bid to drive down housing prices, Finance Minister Moshe Kahlon has proposed taxing Israelis who own more than two pieces of real estate. According to the Finance Ministry, over 50,000 Israelis own three or more properties – a total of some 180,000 houses and apartments nationwide. The treasury has recommended a 1 percent tax that will be based on the value of the apartment and its square footage, but capped at NIS 1,500 ($397) per month. Spouses who live with the property-owners full-time and children under the ages of 18 may not be listed as separate owners of these assets, but married offspring can, the proposal states. The ministry estimated the tax would draw in NIS 800 million ($212 million) to the treasury annually.
“We expect that this tax will contribute to a more appropriate income distribution and reduce income inequality, and will serve as incentive for property owners to sell their property, which will increase the supply of apartments on the secondary market and will lower prices,” it said.
Thus far, this provision in the two-year financial plan has generated the most controversy, with real estate developers crying foul. The chairman of the powerful Knesset Finance Committee, Moshe Gafni (United Torah Judaism), this week announced that he, too, is opposed to it.
“This law, in our opinion, is not good in its current form,” Gafni told the Mamon financial outlet. “First of all, it violates the right to buy property, and may also lead to substantial price increases in the rental market, and that we must avoid.”
More classrooms, more informal education, but school days remain short. The treasury has earmarked an additional NIS 155 million ($41 million) for after-school activities for children from lower socioeconomic backgrounds, with a focus on informal education. The project is designed to reduce the large educational gap in Israel that exists between middle- to upper-class Israelis and Israelis from a lower socioeconomic background, and will be funneled to areas that fall between 1 and 6 on the 10-point national poverty scale. Citing figures from the Central Bureau of Statistics, the treasury noted that among more affluent areas (7-10 on the scale), 74% of students complete the matriculation exams in high school; in poorer areas that figure stands at 19%, with 53.5% don’t even take the exams.
“Informal education strengthens the students’ achievements in formal education,” the treasury said.
The program will largely affect ultra-Orthodox children, kids from the Israeli periphery, and Arab children. For the latter, much of the after-school activity will focus on Hebrew lessons.
At the same time, the proposal moves to postpone by five years a 1997 law that would extend the length of the school day. The Finance Ministry noted that given the budgetary constraints – the implementation of longer school days would cost NIS 2 billion ($530 million), it said – a decision was made to push it off to 2022.
The Education Ministry 2017-2018 budget was NIS 57 billion ($15 billion), an increase of NIS 4.7 billion ($1.2 billion) from a year earlier. The Finance Ministry said some of that funding would go toward building 17,000 new classrooms nationwide.
Slashing government support for Masa. Many Jews in the Diaspora seeking to spend a semester or year in Israel rely on scholarships from the Masa organization to help fund those trips. However, according to the budget proposal, the government will soon limit its funding for Masa to NIS 25 million – half of the maximum funding listed in a 2007 government resolution.
Trains, trains, trains. Some NIS 18 billion ($4.7 billion) in 2017 and NIS 20 billion ($5.3 billion) in 2018 will be directed toward transportation. Construction will begin on two new light rail lines in Tel Aviv, which has the greatest population density in Israel and where just 20% of residents use public transportation to get around. The government will also green-light a new light rail route in Jerusalem, an extension of the Haifa metro, a new line between the northern cities of Haifa and Nazareth, and a new train route between Hadera and Lod.
Cuts in corporate tax, income tax. The government has decided to reduce corporate tax from 25% to 23% over the upcoming two years (one percent in 2017, one percent in 2018). Noting that the wealthy will likely benefit by the reduction in the corporate tax, the treasury has shifted the tax brackets for income tax to even the score, such that Israelis who make low-to-middle-range salaries will pay less in income tax. Moreover, the government was presenting additional tax incentives for international hi-tech companies in an effort to woo investors in the Jewish state
Crackdown on legal gambling ventures. Adopting some of the recommendations by a special committee on Israel’s legal gambling industry, Kahlon will limit its annual growth, ban games that are deemed “addictive,” reduce overhead costs, and impose restrictions on advertising. Currently, legalized gambling in Israel is run by two bodies — Toto, responsible for sports gambling, and Mifal HaPayis, which oversees lotteries, scratch cards and gambling machines. Profits from the industry — after overhead costs are covered and winners are paid — are earmarked for the public good such as education, community centers and sports arenas.
Kahlon has not disguised his disdain for gambling, which he has characterized a tax on the poor, since slots are set up in poorer areas, and “dirty” money.
Medical coverage for some genetic tests. Israel will allocate NIS 500 million ($132 million) to expand the medical services and medications Israelis are eligible for under the socialized healthcare system, NIS 50 million ($13 million) of which will go toward coverage of genetic testing. Health Minister Yaakov Litzman will have until January 1 to hammer out which technologies and medications will be covered. The Health Ministry got a NIS 1.5 billion ($393 million) bump in its annual budget compared to past years, including a NIS 400 million ($105 million) increase to gear up for Israel’s rapidly swelling aging population.
Larger stipends for elderly, Holocaust survivors. The treasury will also boost the supplemental income for Israelis who are eligible for an old-age pension from the National Insurance Institute, though the extent of the pay bump was not immediately clear. In accordance with the coalition agreements with the Yisrael Beytenu party, NIS 350 million in 2017 and NIS 200 million in 2018 will be earmarked for this purpose (though the financial plan did not expressly say so, the funds will likely cover pensions for Jews from the former Soviet Union who are living without pensions — a key demand from the Yisrael Beytenu party before entering the coalition). Moreover, Israel will increase some annual stipends for Holocaust survivors — many of whom live under the poverty line — to NIS 4,160 ($1,100) and will cease to deduct from Israeli welfare payments the reparations survivors receive from Germany.
Cheaper electronics, cosmetics? If the treasury is to be believed, Israelis with friends traveling abroad may be able to stop begging their buddies to bring back that Amazon-ordered phone or computer: The Finance Ministry maintains it will ease regulations on imports of electronic devices and cosmetics, a move it says will ultimately drive down prices of both.
“Despite the relatively high rates of imports of consumer goods, the analysis indicates the Israeli market suffers from high regulation and a bureaucratic burden, which is cumbersome for businesses and manufacturers and poses a significant obstacle to imports,” the Finance Ministry said.