Israel Considers Tax Reform for High Earners, Cutting Parent and Regional Benefits
Translated & summarized from Mignews by baba
Israel's Ministry of Finance and Tax Authority are proposing a tax reform to lower income taxes for high earners, including tech professionals, doctors, and engineers. The plan involves cutting tax benefits for parents and residents of certain areas to compensate for lost revenue. This reform targets over 800,000 individuals in the top income deciles. The proposals aim to rebalance the tax burden and will be presented for public discussion soon.
The story in 5 lines · by baba
- Israel's Ministry of Finance proposes tax cuts for high earners by reducing parent and regional benefits.
- The reform targets over 800,000 professionals in tech, medicine, and engineering earning 25,000-53,000 shekels monthly.
- Proposed cuts include reducing tax credits for children and eliminating local residency tax discounts.
- The plan aims to adjust income tax brackets to benefit those with higher salaries.
- The Ministry of Finance confirmed the internal group's work and plans public discussion of the findings.
Israel's Ministry of Finance and Tax Authority have developed recommendations for a tax reform aimed at reducing income tax for high earners, including professionals in tech, medicine, and engineering. The proposal suggests offsetting budget revenue shortfalls by cutting tax benefits for parents and special discounts for residents of certain towns and settlements.
The initiative targets individuals earning between 25,000 and 53,000 shekels monthly, a group comprising over 800,000 people, primarily in the high-tech sector, doctors, and engineers. These individuals are said to bear a disproportionately high tax burden compared to similar groups abroad, according to a November 2025 Tax Authority study. The top 20% of earners in Israel contribute 61% of the nation's total income and over 80% of direct tax revenues.
To implement the tax reduction, the plan involves adjusting the income tax brackets. Currently, a 31% tax rate applies to income over 19,000 shekels, 35% over 25,000 shekels, and 47% over 47,000 shekels. The proposal seeks to expand the income ranges for the 31% and 35% tax rates.
The proposed cuts to benefits include reducing tax credits for children, which cost the state 14.5 billion shekels in 2026, and eliminating tax discounts for residents of specific localities, costing 2.8 billion shekels annually. Ministry officials acknowledged that reducing these benefits, particularly those for children, would be challenging but emphasized the need to demonstrate the link between such privileges and high tax rates for the working population.
The Ministry of Finance confirmed the internal working group's efforts, involving budget department experts and the Bank of Israel, and plans to release the findings for public discussion after calculations are finalized. The recommendations are intended to be presented to the future government before coalition negotiations conclude, highlighting their professional and non-political nature.
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