Knesset passes 1st reading of tax hike with caveats

After Netanyahu, Steinitz, Katz eliminate 1% tax increase on middle-income earners, MKs push through tax bill by 40 - 27 margin.

August 6, 2012 17:43
1 minute read.
PM Binyamin Netanyahu with Yuval Steinitz

Netanyahu Steinitz 390. (photo credit: Reuters)


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The Knesset on Monday pushed through the first reading of an income tax hike after leaders agreed to compromise on the scope of the bill. The bill passed by a wide margin, with 40 MKs voting for and 27 opposing.

An estimated 421,000 workers escaped the tax hike after Prime Minister Binyamin Netanyahu and Finance Minister Yuval Steinitz reached a last-minute agreement with Knesset Labor, Welfare and Health Committee Chairman Haim Katz to eliminate a 1% increase to the NIS 8,881-14,000 bracket.

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The three men agreed to adjust the second, third and fourth income tax brackets, so that earnings will be charged as follows: less than NIS 5,200 per month - 10%; NIS 5,201-8,880 - 14%; NIS 8,881-NIS 14,000 – 21%; NIS 14,001-20,000 – 31%; NIS 20,001-41,830 – 34%; NIS 41,830 and above – 48%.

For a table showing how much income tax people can expect to pay from January 1 next year, compared to what they pay now, click here.

The government agreed to Knesset Finance Committee Chairman Moshe Gafni’s request to exclude one-time earnings such as severance pay, pension income or proceeds from savings or asset sales from the 2% high-earners surtax. One-time payments will be treated as if they were delivered over a six-year period, ensuring that they do not cross the surtax threshold of NIS 800,000 per year.

Meretz head Zehava Gal-On termed the bill the "the great robbery," and a blow to the social justice movement. "This is a law that changes the rules of the game and attempts to redefine the words 'equality' and 'justice,'" she said. Dozens of social justice protesters demonstrated against the budget cuts opposite the Knesset.

Labor party leader Shelly Yechimovich also slammed the bill, saying that it places an unnecessary and disproportionate burden on the middle class. The bill "will not affect large income earners, who will continue to eat the free meal that Netanyahu has been feeding them," she said.

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