Study: Ultra-Orthodox only pay 4% of total national taxes, costing economy billions
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Despite constituting 14 percent of the working-age population, the ultra-Orthodox community generated only four percent of Israeli tax revenues in 2023, costing the government billions and adding thousands of shekels to the average non-Haredi worker’s annual tax burden, a study by the Israeli Democracy Institute has found.
Should current demographic and employment trends continue, by 2048 about a quarter of Israel’s population will be Haredi but will, in aggregate, contribute a mere 8% of direct tax revenues, the IDI projected.
According to the study — which was based on data from the Central Bureau of Statistics, Tax Authority, Population Authority, and National Insurance Institute — the lack of secular studies in Haredi schools has led to “underperformance in the labor market and significantly lower household incomes relative to the general Jewish population, especially among men.”
As a result, it asserted, “despite consuming more state services, Haredi households pay less in income taxes.”
Fifty-four percent of Haredi men were employed in the first three quarters of 2024 compared to 55.5% in 2023. For women, employment rates have risen steadily from 71% in 2015 to 81% in 2023, only 2% less than non-Haredi women.
According to the Knesset Research and Information Center, members of the ultra-Orthodox community currently enjoy a range of benefits, including reduced fares on public transit, housing assistance and municipal tax discounts.
In addition, as of January 2024, around 71% of nearly 200,000 Haredim registered in Torah institutions paid reduced National Insurance Institute contributions, leading to an annual loss of NIS 99.1 million ($26 million) in revenue for the social security agency.
Overall, only 23% of Haredi men and women pay income tax, versus 62% of non-Haredi Jewish men and 46% of non-Haredi Jewish women, the IDI study found.
In addition, if the ultra-Orthodox would participate in the workforce at similar rates to their non-Haredi counterparts, they would generate an additional NIS 9.5 billion ($2.6 billion) in additional direct labor tax revenue, rising to NIS 44.6 billion ($12.6 billion) by 2048.
According to the IDI’s calculations, in 2025 non-Haredi workers will pay an additional average NIS 3,540 ($1,000) in taxes “as a consequence of low Haredi workforce participation,” a figure expected to rise to NIS 11,266 ($3,192) by 2048 if current trends continue.
“This is unsustainable — the demographic trends and the fact that they don’t contribute to the army and also to the economic structure. It’s just not feasible,” IDI researcher Gabriel Gordon, the author of the study, told The Times of Israel in a recent telephone interview.
Content retrieved from: https://www.timesofisrael.com/study-ultra-orthodox-only-pay-4-of-total-national-taxes-costing-economy-billions/.
