Cabinet okays income tax breaks for parents of young children
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Cabinet okays income tax breaks for parents of young children

Treasury proposal must still pass 3 readings in Knesset; Kahlon vows plan will save couples 'thousands of shekels each year'

Marissa Newman is The Times of Israel political correspondent.

Finance Minister Moshe Kahlon arrives at the weekly cabinet meeting at the Prime Minister office in Jerusalem on May 3, 2017. (Emil Salman/POOL)
Finance Minister Moshe Kahlon arrives at the weekly cabinet meeting at the Prime Minister office in Jerusalem on May 3, 2017. (Emil Salman/POOL)

The cabinet on Wednesday approved a plan to increase income tax breaks for parents of young children, in a proposal that Finance Minister Moshe Kahlon pledged would save working couples “thousands of shekels a year.”

The tax plan is part of a broader money-saving proposal announced last month in a press conference by Kahlon that surprised even Prime Minister Benjamin Netanyahu, drawing some criticism from Likud loyalists.

The initiative must still pass three readings in the Knesset before it is implemented.

According to the proposal, both men and women would be eligible for 1.5 income tax credit points each month in the first year their child is born, and 2.5 points for every subsequent year until the child turns six years old. Each monthly point is valued at NIS 215 ($60) per child, per parent.

Currently, mothers of young children are eligible for half a tax credit in the first year their child is born, and two credits monthly from the ages of 1-5. Men, however, only receive benefits until their child turns 4.

According to Finance Ministry calculations, for a couple with two children aged 4 to 6, where the man earns a gross monthly salary of NIS 12,000 ($3,270) and the woman earns NIS 8,000 ($2,180) before tax, the changes would amount to an extra NIS 12,900 net ($3,500) to their yearly income.

Where both the man and the woman in a partnership earn NIS 15,000 ($4,000) each every month and have three children under the age of 6, the sum of NIS 16,770 ($4,570) will be added to their annual available income.

“Just as we pledged, we are working enthusiastically to implement the plan and help the middle class and working families, as soon as possible,” said Kahlon in a statement. He vowed that families would see the benefits “very soon,” and noted that it was “expected to raise the income of working couples by thousands of shekels a year.”

At the start of the weekly cabinet meeting on Wednesday, Prime Minister Benjamin Netanyahu threw his support behind the proposal, saying it offers incentives to young Israelis to remain in the workforce.

“I support this. I believe that all of you here will support it because it is government policy to encourage work,” he said.

The additional tax credits are part of Kahlon’s broader NIS 4 billion a year ($1.1 billion) plan, which includes subsidies for after-school education frameworks, higher income supplements for low-income earners, and tax cuts on children’s clothes, shoes and cellular phones. These reforms have yet to be brought to a cabinet vote.

The larger plan won widespread praise when it was announced last month, though the focus shifted when it became apparent that Netanyahu was not briefed ahead of time or invited to the press conference where Kahlon presented the proposed reforms.

Kahlon denied it was a snub, saying that the initiative was “a continuation of government policy” so that he didn’t see “anything to update anyone about. Nothing special happened here. We’re implementing government policy.”

Netanyahu backers, however, subsequently took to the media to berate the former Likud minister for blindsiding the prime minister.

Kahlon has positioned himself as the champion of the middle class, which took to the streets in 2011 in countrywide social-justice protests demanding affordable housing and a lower cost of living.

Kahlon’s program is aimed at two principal working populations: families whose income is below the minimum for taxation, which means they do not qualify for certain income supplements; and middle-class families that are just over the threshold above which citizens must pay tax.

Sue Surkes contributed to this report.

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