Municipal tax plan advanced for Knesset OK; opposition brands it state-backed ‘theft’

Smotrich slams ‘irresponsible’ strike action by some local councils against plan, which will take funds from richer cities to fund poorer ones; Gantz brands move discriminatory

Carrie Keller-Lynn is a former political and legal correspondent for The Times of Israel

Finance Minister Bezalel Smotrich leads a Religious Zionism faction meeting at the Knesset in Jerusalem, May 15, 2023. (Yonatan Sindel/ Flash90)
Finance Minister Bezalel Smotrich leads a Religious Zionism faction meeting at the Knesset in Jerusalem, May 15, 2023. (Yonatan Sindel/ Flash90)

Finance Minister Bezalel Smotrich launched a verbal attack on Monday against the local authorities that are currently striking in protest of his move to redirect some municipal tax revenues to poorer localities.

Smotrich called the strike a “wanton and irresponsible decision” of certain mayors who cannot handle the government’s financial policy.

Opposition leaders backed up the local mayors, saying the government’s plan is state-sanctioned “theft” that financially discriminates between the government’s backers and its critics.

Late Monday evening, the plan was approved in a vote of the Knesset Finance Committee, and will now advance alongside the budget to the Knesset floor.

On Sunday, an umbrella organization for Israeli mayors called for a general municipal services general strike, to pressure the coalition to kill its plan to pool and redistribute a portion of municipal taxes collected from commercial entities. The measure would pull funds from central and wealthier localities to the benefit of more remote and modest municipalities, billed as a way to incentivize housing in the latter.

Detractors say the proposal unfairly taxes localities that invested in building economic infrastructure, and that it will hurt their ability to provide education, social, and other municipal services.

Currently, West Bank municipalities are legally blocked from paying into the fund, but they can benefit from it, Finance Ministry Director General Shlomi Heizler said Monday, in an interview with Army Radio.

Opposition Leader Yair Lapid speaks during a Yesh Atid faction meeting at the Knesset in Jerusalem, May 15, 2023. (Yonatan Sindel/Flash90)

“Today, Israeli residents in some cities across the country have suffered an unnecessary and harmful strike,” as a result of “a number of mayors who are unable to adequately deal with the decision of the Israeli government and the Finance Committee to establish the housing fund,” Smotrich said at his party’s faction meeting on Monday.

“The fund is the right thing for the State of Israel and all its residents,” Smotrich said, reiterating that the municipal tax shave will be approved later Monday as part of the Arrangements Bill accompanying the 2023-2024 state budget, despite vociferous opposition from a number of Israeli mayors and from opposition politicians.

Mayors have attended Finance Committee meetings over the past two months to apply pressure against the measure, including two stormy debates Sunday and Monday. The coalition is continuing to push the plan forward and will bring it for a plenum vote next week, according to Smotrich.

Saying that his Yesh Atid party supports the walkout, opposition leader Yair Lapid claimed “this government has decided to steal our property tax money… the government is coming to municipalities whose sole misdeed is being properly managed and having residents who work and pay taxes, and confiscating their money.”

National Unity party chief Benny Gantz called the entire proposed state budget “a partition plan,” discriminating between the sectors of society represented by the current coalition parties and the rest of Israel’s citizens.

Federation of Local Authorities chair and mayor of Modiin Haim Bibas speaks at a Knesset Finance Committee meeting on May 14, 2023. (Oren Ben Hakoon/Flash90)

This is “a budget that is solely aimed at separating those who have representation in the coalition from those who do not,” he said. “Instead of being called a state budget, it should be called a coalition budget.”

In particular, Gantz slammed the coalition’s plan to transfer municipal taxes from wealthier local authorities to other ones as an “outrageous injustice” that will have to be “paid for by residents of south Tel Aviv,” generally considered to be a poorer section of the wealthy city.

Lapid similarly argued that the municipal tax plan is aimed at redirecting funds away from supporting kindergartens, public transportation, and garbage disposal, to benefiting the “friends” of Smotrich and Shas party leader Aryeh Deri.

Lapid claimed that Prime Minister Benjamin Netanyahu’s government has been “destroying the economy” by raising stipends to Haredi men studying in seminaries “to make sure they don’t join the workforce” and by “funneling billions to Smotrich’s friends in [illegal West Bank] outposts.”

On Sunday, the cabinet approved a record-breaking NIS 13.7 billion ($3.7 billion) in discretionary funding, a large chunk of which will go to fulfill coalition promises made to ultra-Orthodox parties.

Labor party leader Merav Michaeli leads a faction meeting at the Knesset in Jerusalem, May 15, 2023. (Yonatan Sindel/Flash90)

Labor party leader Merav Michaeli joined her fellow opposition heads in lambasting the government’s plan, echoing Lapid’s sentiment that it is “theft.”

At the start of her faction meeting, Michaeli said that if the “outrageous” initiative passes, her party will join a petition against it to the High Court of Justice.

“We won’t let them take the public’s money to use for political purposes,” she said.

Gantz said the budget is another example of what he has branded Netanyahu’s government’s divisive style: “This government divides us and functions as the government of half the people.”

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