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NEWS
Forty Percent of Tax Reductions Go to Upper Tenth
by G. Lazer
Leah Achdut, head of Bituach Leumi's research department,
said at the First Annual Conference for Economics and Social
Affairs held at the Van Leer Institute in Jerusalem, the
cumulative tax reductions following the income tax reforms
between 2001 and 2006 will come to NIS 10 billion ($2.1
billion), approximately 2 percent of the gross national
product; the majority of the reductions—71
percent—will benefit the top three tenths, including 40
percent to the top tenth percentile in terms of earned
income.
Achdut said that between 2001 and 2006 income taxes will
decrease from an average of 18.5 percent to 14.2 percent.
Bituach Leumi's income (including health tax) remained
unchanged during this period but the burden on the well-to-do
strata increased while the burden on the weak strata
decreased.
The income tax reforms during these years, however, were
regressive, Achdut noted, meaning that the upper strata
benefited while the lower strata were harmed. The tax
reductions increased the overall average expendable income by
4.7 percent per family. The amount of expendable income rose
0.9 percent in the lowest tenth percentile of earners but it
rose by 6.3 percent in the upper tenth. After the tax
reductions the share of the total expendable income of the
country of the top two tenths rose from 44.8 percent in 2001
to 45.5 percent in 2006. The share of the bottom eight tenths
in the country's expendable income obviously decreased.
Achdut said that the government's decision-making is often
hasty and lacks in-depth discussion of social repercussions.
Large segments of the population were victimized by the tax
reductions between 2001 and 2006. Among other harmful
decisions, the total value of Bituach Leumi allotments was
reduced from 9.4 percent of the national product in 2001 to
7.7 percent in 2005. During the past four years Children's
Allowances plummeted by 45 percent, unemployment benefits
dropped 47 percent and Guaranteed Income dropped 25
percent.
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