Israel Eyes Tax Cuts for High Earners, Cuts to Child and Periphery Benefits
Translated & summarized from Cursorinfo by baba
Israel's Ministry of Finance is preparing a tax reform package to lower income taxes for high earners, including over 800,000 professionals. To compensate for lost revenue, the plan proposes cutting child tax credits and benefits for residents of peripheral areas. The recommendations aim to be released before a new government is formed to highlight their professional, non-political nature. Officials acknowledge that eliminating popular benefits may face political challenges.
The story in 5 lines · by baba
- Israel's Finance Ministry plans tax cuts for over 800,000 high earners, including tech workers and doctors.
- The reform proposes reducing child tax credits and peripheral area benefits to offset revenue loss.
- The tax cuts would primarily benefit professionals earning between 25,000 and 53,000 shekels monthly.
- Current tax rates for high earners are considered excessive compared to other developed nations.
- Officials acknowledge potential public backlash against eliminating popular tax benefits.
Israel's Ministry of Finance and Tax Authority are developing a major tax reform package aimed at reducing income tax for high earners, according to a report by "Calcalist." The recommendations, intended to be released before a new government is formed to emphasize their professional nature, would benefit over 800,000 highly skilled professionals. The proposed changes target individuals in the ninth and tenth income deciles, including high-tech workers, doctors, and engineers earning between 25,000 and 53,000 shekels gross per month. Experts argue that the current tax burden on these specialists is significantly higher than in other developed nations. Data indicates that the top 20% of earners generate about 61% of the country's total income and over 80% of direct tax revenue. Officials are concerned that excessive taxation may demotivate skilled workers and encourage emigration, while the ultra-wealthy, whose fortunes stem from investments and business ownership, are seen as undertaxed.
The reform plans to raise the income thresholds for the 31% and 35% tax brackets, which currently start at 19,000 and 25,000 shekels respectively. The top rate of 47% applies to incomes over 47,000 shekels. To offset the budget shortfall from these cuts, the proposals include reducing tax credits for children, which cost the state 14.5 billion shekels in 2026, and eliminating preferential tax benefits for residents of peripheral areas, costing approximately 2.8 billion shekels annually. The Ministry of Finance views these peripheral benefits as politically motivated. However, officials acknowledge that future politicians may be hesitant to abolish these popular benefits due to potential public backlash. The working group, comprising economists from the Ministry of Finance, the Budget Division, and the Bank of Israel, is finalizing calculations. Ministry representatives confirmed the document's preparation and pledged to release it for public discussion upon completion.
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