Taxation as an Engine of Equality

The report points out directions for changes in Israel’s taxation policy, so as to not only cope with the present corona crisis but also to stimulate long-range economic and social development policy, for the purpose of upgrading the standard of living of Israelis and, at the same time, increasing social equality

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Israel is a low-wage economy. Over most years, the level of taxation (in terms of GDP) in Israel has been relatively low. It was raised only during the period of Israel’s two big wars, the Six Day War and the Yom Kippur War.

The corona epidemic revealed to one and all public service systems suffering from under-funding, first and foremost the public health system, in which there is a dearth of equipment, laboratories, hospital beds and training personnel.

Proper state funding requires higher taxation.

The call to significantly increase state revenues from taxation is not just a specific response to the economic implications of the corona epidemic, but rather, it is a call to adopt a taxation system that promotes equality, one that would enable Israel to undertake active policies of universal economic and social development, so that the entire population of Israel approaches the standard of living and cultural and scientific level of activity of western European countries

State Revenues (All Levels of Government) from Taxation as a Percentage of GDP – 1995-2018, Israel and Average of OECD Countries

Whereas in the past Israel depended to a large extent on foreign aid from Jewish communities abroad and friendly governments, today we are a country that is able to stand on its own. We no longer need “Uncle Sam.” We have developed our own affluent strata, including a wealthy stratum that has the ability to provide the government of Israel with the wherewithal for a wide variety of social policies. The lion’s share of additional taxation recommended in this report is to be paid by the two highest income deciles, and among them by the top one percent and top 0.1 percent. Such an investment, if well addressed to education, training and strategic investment in peripheral areas, will eventually lead to the broadening of the tax base.