Israel Faces 16% Direct Tax Increase by 2065 Without Higher Haredi Workforce Participation
Avigdor Lieberman, chairman of the Yisrael Beiteinu party, claimed at the National Security Conference on July 27, 2026, that without a "law for universal conscription" and an extension of mandatory IDF service, all Israeli citizens would have to pay at least 16% more income tax. This statement is based on a professional legal opinion from the Ministry of Finance's legal advisor regarding the Basic Law: Torah Study. The opinion warns that if the participation of Haredi men in the workforce does not increase, by 2065 direct taxes will need to rise by 16% to maintain current public service levels without increasing the budget deficit.
However, the tax increase projection relates to the low employment rates and wages among Haredi men, not solely to their military service exemption. The Ministry of Finance's report highlights that Haredi men have about a 50% employment rate and earn less than half the average non-Haredi Jewish wage, which negatively impacts Israel's economic output and tax revenues. Experts like Dr. Gilad Malach from the Israel Democracy Institute and Dr. Eitan Regev from the Institute for Haredi Strategy and Policy emphasize that meaningful military service could improve Haredi integration into the labor market by providing skills and socialization.
The 16% figure refers to an increase in direct taxes broadly, including income tax, corporate tax, capital gains tax, and others, not exclusively income tax. The demographic assumptions underlying the forecast are also contested. The Ministry of Finance relies on Central Bureau of Statistics projections that the Haredi population will constitute about one-third of Israel's population by 2065. In contrast, more recent studies suggest a lower figure around 22.6%, due to declining birth rates and sector exit.
The original tax impact calculation was conducted by the Bank of Israel in 2019, presented by Governor Amir Yaron. It showed that if Israel's 2018 tax structure reflected the expected 2065 demographics, direct tax revenues would drop by 14%, necessitating a 16% tax increase per capita to maintain fiscal balance. The Ministry of Finance clarified this percentage is relative to current tax rates, not an absolute point increase.
Lieberman’s office responded that those who do not serve in the military do not join the workforce, do not complete matriculation, and remain a burden on society. Nonetheless, the analysis concludes that Lieberman’s claim is imprecise: the need for tax increases stems from low Haredi workforce participation rather than military service exemption alone, though the two issues are interconnected.
