To what extent will the income tax rate be affected by the conscription of Haredim?
Liberman said that without universal conscription and an extension of service, income tax would have to rise by 16%. This number does exist in official opinions, but it describes something slightly different. The 'Whistle' from Globes.
For definitions of the ratings, click here. Correct - the statement is mostly correct. Inaccurate - substantial parts of the statement are incorrect. Misleading - the statement creates a false impression or takes facts out of context. Incorrect - the statement is wrong. For your judgment - the factual situation is too complex for a definitive grade.
Summary of the check
Claim: Without universal conscription and an extension of service in the IDF, income tax will have to rise by at least 16%.
What is correct: An opinion from the Ministry of Finance does indeed state that given current demographic trends, direct taxes will have to rise by 16%.
What is incorrect: The estimate in the opinion is based on the non-integration of Haredim into the labor market - not on non-conscription.
Rating: Inaccurate.
The chairman of Yisrael Beiteinu, MK Avigdor Liberman, claimed that if a 'universal conscription law' is not enacted and mandatory service is not extended, 'all citizens of Israel will have to pay at least 16% more income tax.' We checked what the figure is based on.
The source of the figure is an opinion by the legal advisor of the Ministry of Finance regarding the Basic Law: Torah Study. The opinion states that if the participation of Haredi men in the labor market does not increase, by 2065 it will be necessary to raise direct taxes by 16% to maintain the existing level of public services without increasing the deficit. In other words, Liberman is relying on a real professional document, but his quote mixes two issues. The opinion does not determine that the non-conscription of Haredim in itself will require a tax hike, but rather that the continuation of current employment patterns of Haredi men - relatively low employment and wage rates - could harm the GDP and state revenues. However, there is a connection between the issues.
Dr. Gilad Malach from the Israel Democracy Institute explained that in the past, lowering the exemption age was considered a tool for integrating Haredim into employment, but after the war, such a solution became more problematic socially and legally. In his view, significant conscription could help in acquiring skills and high-quality integration into the labor market. Dr. Eitan Regev from the Haredi Institute for Public Affairs also noted that regulating the status of Haredi men - both those who enlist and those who study Torah - is an important condition for earlier entry into the labor market.
There is another caveat: the figure refers to 'direct taxes,' not necessarily income tax. While income tax is a central source of direct tax collection, the category also includes corporate tax, capital gains tax, real estate appreciation tax, purchase tax, and more. Therefore, it is not clear that such an increase would be imposed specifically through income tax.
The demographic basis of the calculation is also not free from controversy. The opinion relies on the CBS forecast that the Haredi society will reach about a third of the population by 2065. The Haredi Institute for Public Affairs argues that more up-to-date forecasts, based on a decline in birth rates and departures from the sector, point to a lower rate - about 22.6% in a certain scenario. The original calculation itself was performed at the Bank of Israel, in a presentation by Governor Prof. Amir Yaron from 2019. According to the presentation, if the demographic structure of 2065 had already existed in 2018, direct tax collection would have been 14% lower; to balance this, a 16% increase in direct taxes would have been required.
The Ministry of Finance confirmed that the intention is an increase in tax per person. These are percentages of the existing tax - not an addition of 16 percentage points (for example, that the lowest tax bracket would rise from 10% to 11.6%).
On behalf of MK Avigdor Liberman, it was stated in response: 'Whoever does not enlist does not join the labor market, does not complete matriculation exams, and does not acquire a profession, and continues to be a burden on the rest of Israeli society for their whole life.'
Bottom line: Liberman's words are inaccurate. The estimate regarding the need for a tax hike stems from the non-integration of Haredi society into the labor market, and not in the case of non-conscription. However, it is possible to point to a connection between the things.
