On the sly, the Treasury is hatching plans to divert tax revenues from the
country’s solvent, most prosperous and patently well-managed municipalities to
prop up the insolvent, least prosperous and most badly managed local
authorities. Pro forma, this “sharing the wealth” arrangement would subsidize
educational and welfare outlays.
The idea is to shift around NIS 1.2
billion by forcing stronger municipalities to match government spending on
education and welfare to a greater proportion than hitherto. Thus, stronger
municipalities will fund 50 percent of their education budget from their own
resources so that poor municipalities will need to contribute no more than
The Treasury further proposes that rather than let cities collect
property taxes from locally situated government offices, these taxes will be
pooled in a central fund and apportioned to other municipalities on the basis of
All the above is a convoluted way of saying that residents of some
cities will be obliged to pay for the services accorded to residents of other
On paper it sounds fair to support have-nots at the expense
of those who seem to be doing better. But that is the philosophy that governs
the payment of taxes to the central government. The revenues collected from all
citizens, wherever in the country they reside, are pooled to the advantage of
the collective, regardless of domicile.
Local taxes are inherently
different, however. Here the notion is for residents of a community to pay rates
for the benefit of their own locale. This generally goes to make up for what the
central government does not finance.
When the central government begins
to fiddle around with the funds it allocates to different cities or when it
schemes to force some cities to spend more for the sake of others, the inherent
distinction between local and central taxes is broken down. What actually
happens is that the local taxes paid by residents in one town go to underpin the
residents of another.
Tel Aviv Mayor Ron Huldai replied on behalf of the
Forum of Fifteen (the strongest municipalities), which he heads. What the
Treasury is mulling, he said, is “a de facto cut in central government services
while placing the onus for them on local governments,” (thereby forcing them to
collect at higher rates) and “making municipal taxes another revenue source for
the central government.”
Subtext: Money collected from residents for
given purposes will be earmarked elsewhere and disappear somewhere in the
Treasury’s coffers. This in nationalization of local taxes.
asserts, “This is tantamount to usurping the local taxes paid by 4.2 million
Israelis” who reside in the 15 middle-class cities, and “levying extra taxes on
55% of the citizenry,” without the central government shouldering the blame for
the additional burden.
But this is worse than just sharing the wealth. It
wouldn’t be so objectionable were it merely a matter of the periphery being
disadvantaged because of its remoteness from economic hubs. But given our
anomalous reality, well-administered cities are required to foot the bills of
extremely malfunctioning administrations – in many cases responsible for their
These basket-case municipalities frequently and willfully
fail to collect local taxes, thereby hampering their effectiveness and
triggering vicious cycles of incremental insolvency. In this category –
concomitantly plagued by nepotism and touched by corruption – is much of
Israel’s Arab sector, where the notion of not collecting what the “Zionist
system” requires enhances any mayor’s popularity.
Without their own
income, municipalities are bound to fail. Going broke and then expecting the
government to bail them out is their calculated policy. Here any wealth-sharing
devoid of stringent built-in controls and deterrent penalties will flush
taxpayer money down the drain.
Not only is this patently unfair, it is
counterproductive in the extreme. Vastly different municipalities cannot all be
treated as if they were identical and afflicted by the same malaise. It is
reasonable and desirable to decentralize where possible, just as there is
abiding need to tighten the reins of supervision on palpably delinquent local
authorities. For the Treasury to undermine this logic obstructs the common good.
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