Kahlon announces sweeping tax cut program for working families

Hasty press conference seen as revenge against Netanyahu.

Moshe Kahlon (photo credit: MARC ISRAEL SELLEM)
Moshe Kahlon
(photo credit: MARC ISRAEL SELLEM)
Promising to ease the financial burden of Israel’s working families and return billions of shekels to the public, Finance Minister Moshe Kahlon announced a series of intended tax cuts at an impromptu press conference on Tuesday afternoon.
Called the “Net Family Plan,” Kahlon’s program includes benefits like subsidies for after-school activities, extra tax points for men and women with children up to six years old, expansion of work grants and reduced taxes on baby clothes, shoes and mobile phones. The program, according to the Finance Ministry, will raise net household salaries by tens of thousands of shekels each year.
“The State of Israel says today in a clear voice to working Israelis that it knows how to give and not just take,” Kahlon said. “The Net Family Plan brings good news to young working couples. This is a program that encourages entering the employment market, increases equal opportunity and, above all, sees people as people rather than as numbers.”
Tuesday’s Tel Aviv press conference highlighted tensions between Kahlon and Prime Minister Benjamin Netanyahu.
Kahlon hastily announced the press conference and did not inform the prime minister of it in advance. The move was seen as revenge by the finance minister against Netanyahu, who has repeatedly taken credit in the past for Kahlon’s economic initiatives.
Kahlon said he did not need to update Netanyahu, because the plan was the continuation of the government’s current polices. He also said he does not believe elections are around the corner.
Sources close to Netanyahu said that the government’s policy is to bring down the cost of living and encourage people to go out and work. The recommendations Kahlon presented, they said, “are in the right direction and will be studied with a positive approach.”
But coalition chairman David Bitan complained that the plan would not help the handicapped, Health Minister Ya’acov Litzman said it should have helped the health system and Education Minister Naftali Bennett was reportedly upset he was not told in advance about the parts of the plan that impact his ministry.
MK Ksenia Svetlova (Zionist Union) said, “There is a smell of elections in the air, and the finance minister’s speech sounds like an election speech in every respect. If he really wanted to work for the middle class, and for the elderly and the disabled, who were, unsurprisingly, excluded from his current speech, he would fight for every shekel in the budget.”
Stressing that “the citizens of Israel are not fools,” Svetlova said that the finance minister must not sell Israelis “his Band-Aid as a real and serious medicine.”
“Nothing has changed, and the Netanyahu government, with each of its ministers, is concerned only about its survival,” she added.
Opposition leader Isaac Herzog, on the other hand, praised Kahlon’s initiative.
“Sometimes it is permissible and necessary to say a good word,” Herzog said. “The finance minister did today what should have been done long ago. The program to strengthen the middle class is good, important and welcome. Now we must replace Bibi.”
As far as the details of the Net Family Plan are concerned, the program focuses on two groups – families with children who do not reach the tax ceiling and are entitled to a work grant (earned income credit) and middle-class families who exceed that tax threshold.
The plan, which would cost the government about NIS 4 billion per year, intends to remove families from a cycle of poverty by significantly increasing their net wages, the Finance Ministry said.
The program intends to grant mothers and fathers of children up to six years old extra tax points, which would increase the amount of money they take home from their salaries.
The Net Family Plan also calls for the subsidy of afterschool programs, according to socioeconomic status and geographical region, enabling parents to afford afternoon childcare and stay at work for longer hours.
In addition to boosting tax points and providing subsidies for after-school care, the Net Family Plan was designed with the intention of increasing the work grants provided to parents.
Those individuals earning up to NIS 5,000 per month with one or two children would receive NIS 495, while those with three or more children would receive NIS 720, the Finance Ministry said. To incentivize labor market participation, those families with two working parents would receive an extra 30% in grants.
As a further measure to reduce the cost of living, the Net Family Plan calls for a reduction in taxes associated with purchasing shoes, baby clothes and cellular phones.
According to the program, the import of shoes and phones would be exempt from taxes, while the rate for children’s clothing would drop to 3%.
“By reducing taxes on clothing, footwear and mobile devices at a cost of hundreds of millions of shekels, and by adding credit points to parents, we will increase the disposable income of working families by thousands of shekels a year and strengthen the middle class – the backbone of Israeli society,” Kahlon said. “The program will serve as a growth engine for the economy while strengthening Israeli society, the Israeli working family and the economy.”
Herb Keinon contributed to this report.