Knesset approves family tax break plan
Lawmakers unanimously pass bill that increases monthly taxation credits earned by parents of young children
The Knesset on Wednesday unanimously approved a plan to boost tax breaks for parents of young children as part of Finance Minister Moshe Kahlon’s broader middle-class benefits program.
According to the proposal, each parent would be eligible for some NIS 320 ($89) on average in monthly tax relief per child under 1, and some NIS 540 on average per child per month for every child aged 1 to 6.
The bill passed its final votes late Wednesday with 59 MKs voting in favor and none against. It will apply retroactively form January 1, 2017.
The new credits mark a 300% increase for mothers of young children under 1, who until now were only eligible for a 108-shekel monthly tax credit in a child’s first year. The credit for older children is raised 25% and extended for one year, from NIS 430 in credits per child per month from the ages of 1-5. The change for fathers is even more dramatic, as they had previously seen the benefits end when a child turned 4.
Kahlon told lawmakers during a plenum debate before the vote that the plan “is good news for young couples, [and] encourages going out to work” — since it only applies to those with an income.
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.
For relatively high earners, where both parents earn NIS 15,000 ($4,000) per 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.
Prime Minister Benjamin Netanyahu threw his support behind the proposal, saying at a cabinet meeting earlier this month that 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.”
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.
Times of Israel staff contributed to this report.
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