Israeli Finance Ministry Warns Economic Harm and Tax Hikes from Torah Study Basic Law
Translated & summarized from Globes by baba
Israel's Finance Ministry opposes the Basic Law: Torah Study, warning it will increase military reserve burdens and discourage ultra-Orthodox workforce participation, potentially forcing a 16% tax hike within 30 years to maintain public services. The law aims to constitutionally protect Torah study and military exemptions but raises significant economic concerns.
The story in 6 lines · by baba
- Finance Ministry warns Basic Law: Torah Study will harm economy and increase taxes by 16% in 30 years.
- Law enshrines Torah study as a fundamental value, enabling military draft exemptions for ultra-Orthodox men.
- Reserve military service costs expected to reach 170 billion shekels from 2023-2026.
- Ultra-Orthodox male employment remains at 50%, with little improvement over the past decade.
- Economic incentives discourage ultra-Orthodox workforce integration, increasing government spending.
- Ultra-Orthodox population projected to be one-third of Israel by 2065, intensifying fiscal challenges.
The Israeli Finance Ministry opposes the proposed Basic Law: Torah Study, cautioning that it could cause significant economic damage due to increased reserve military service burdens and incentives discouraging ultra-Orthodox men from joining the workforce. The ministry warns that if current trends continue, the government will need to raise taxes by 16% within 30 years to maintain current public service levels.
The Basic Law, recently approved in a preliminary Knesset reading, aims to enshrine Torah study as a fundamental value in Israel, counterbalancing the constitutional right to equality. It seeks to legally justify exemptions from military conscription for Torah scholars. The original draft described Torah learners as "serving a significant service to the State of Israel and the Jewish people," a phrase that remains in explanatory notes.
The Finance Ministry's legal advisor highlighted that while the law's budgetary cost is hard to quantify, it could require substantial resource allocations. The law might reduce the number of ultra-Orthodox men enlisting in the Israel Defense Forces (IDF), increasing reserve duty burdens on others and exacerbating economic costs. The ministry also noted that the law could strengthen incentives that discourage ultra-Orthodox men from workforce integration, where employment rates have stagnated at about 50% over the past decade.
The ministry estimates that the economic cost of reserve service for one soldier averages 50,000 shekels per month, with cumulative costs from 2023 to 2026 expected to reach approximately 170 billion shekels. Government expenses for reserve service during this period are projected at 115 billion shekels. With the ultra-Orthodox population expected to comprise about one-third of Israel's population by 2065, failure to increase their employment rate would necessitate a 16% rise in direct taxes to sustain current service levels without increasing the budget deficit.
The ministry attributes low ultra-Orthodox employment partly to economic incentives that provide government assistance without requiring workforce participation, sometimes reducing benefits upon employment. These benefits, amounting to thousands of shekels monthly per household, create an alternative income that hinders labor market integration. The Basic Law debate continues amid concerns about its fiscal and social implications.
