Knesset passes first Trajtenberg-based bill

New law will lower income tax on middle class, includes additional proposals by UTJ MK Gafni.

Knesset 521 (photo credit: Marc Israel Sellem)
Knesset 521
(photo credit: Marc Israel Sellem)
The Knesset passed its first bill based on the Trajtenberg Committee on social change’s recommendations in its second and third (final) readings on Monday evening.
“The Bill to Change the Tax Burden” passed its final reading with 40 MKs in favor and none opposed to the measure, which marked a change in the tax code emphasizing benefits for the middle class. The bill combined a government- proposed bill based on Trajtenberg’s findings with initiatives by Knesset Finance Committee Chairman Moshe Gafni (United Torah Judaism).
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Gafni said that “for the first time, we succeeded in changing the regular economic pattern,” and “this is the first bill to be approved by the Knesset that comes from [last summer’s] social protests.”
According to the new bill, Gafni explained, tax increases will require the approval of the Finance Committee, which he said would prevent harm to the lower and middle classes.
In addition, the newly-passed law will increase taxation on those with higher salaries, starting January 1, 2012 and lower income tax for the middle class (monthly salaries of NIS 8000-14,000) by two percent.
Gafni said his committee added numerous clauses to the bill, including one that would waive income tax for pensions up to NIS 13,000 per month and reduce interest on Housing Ministry mortgages by 1%.
“Our bill does not ignore the housing crisis, and we are not prepared to stop [drafting such legislation],” the Gafni stated.
He repeated his assertion the report is problematic and will not solve all of the social ills.
“It does not include lowering income tax for the middle class, it doesn’t include housing, water, electricity prices,” he said. “There is also an ideological element – there were 60 people from the same group in society on the Trajtenberg Committee. Who would have better ideas – the Finance Committee, which represents every group, or the Trajtenberg Committee, which represents one?” After the bill was passed, Finance Minister Yuval Steinitz congratulated the Knesset on its vote, saying “this is a mark of honor.”
“The whole Knesset, with the exception of one party, [Hadash], united around this bill and recognized the importance of the reform,” Steinitz said. “We took an important step. We slightly raised, without crazy populism, taxes for the wealthy and those with high incomes. We slightly raised corporate tax and lowered taxes on the weaker classes.”
Steinitz warned against acting irresponsibly in light of the global recession.
“We watch the economic crash in Europe and hope that Europe will not fall apart,” he said. “We need to be ready for anything that may happen. If Europe crashes economically, the global crisis may grow stronger.”
The Finance Minister said his office is preparing plans “to respectably and successfully withstand the economic tsunami that is hitting the world.”