(photo credit: REUTERS)
The Knesset Finance Committee on Tuesday began working on a bill expanding the scope of Israel’s negative income tax, an anti-poverty measure favored by the Bank of Israel.
“This is very good news for the weak populations. The new law, after it is passed, will benefit the state because it will increase the incentive to work,” said committee chairman Moshe Gafni (United Torah Judaism).
Sometimes called the earned income tax credit, negative income tax gives a government-funded wage boost to low-income workers.
The idea behind it is that it encourages poor people to stay in the workforce rather than on welfare, without adding a financial burden to small businesses.
BoI Gov. Karnit Flug has noted that it is of particular use in the effort to integrate ultra-Orthodox citizens into the labor force, calling it “a mechanism that deals with the problem of the working poor and does not adversely impact the incentive to work.”
The bill would increase the top of the qualifying income range from the current NIS 6,157 a month for families with three or more children to NIS 6,766. For single mothers, the cap would climb to NIS 11,000.
It would also halve the rate at which the grant is phased out as income increases, from NIS 0.34 for every additional shekel earned to NIS 0.17.
The cost would amount to an estimated NIS 130 million.
Still, some MKs in the committee pushed for more reforms.
Kulanu MK Rachel Azaria noted that it would be more effective if it were doled out immediately, and not after a year or more.
“Many times people do not submit [paperwork] when it’s money that will come in a long time,” she noted. Yishai Perlman, a representative of the Tax Authority, argued that with only four people in charge of negative income tax at the authority, processing requests so regularly would be impossible.
Zionist Union MK Manuel Trajtenberg added that the step, though laudable, was not sufficient to help the poor.
The poverty rate, he noted, was slightly down, but had increased for working people from 12.5 percent in 2013 to 13.1 percent in 2014.