Histadrut demands urgent review of income tax bracket changes

The Histadrut has called on the Ministry of Finance to reassess its proposed plan to widen income tax brackets as part of the Economic Arrangements Law. In a letter sent by Adam Blumenberg, Head of the Trade Union Division and Deputy Director for Economy and Policy at the Histadrut, to Finance Minister Bezalel Smotrich, the organization warns that the measure presented as a relief for the middle class will primarily benefit high-income earners, leaving low and mid-wage public sector workers outside the circle of benefit.

The appeal follows the publication of the Finance Ministry’s economic plan, which aims to significantly expand the range of subjects subject to lower tax rates. According to the proposal, tax burdens will be reduced for those earning an average monthly salary of 16,150 NIS or more. The cost of these tax cuts is estimated at approximately 5 billion NIS.

However, Histadrut’s analysis reveals that, despite the stated intention to assist weaker segments, the main beneficiaries will paradoxically be high-income earners. Data from the National Insurance Institute for 2024 shows that only workers in the top three income deciles (8–10) will experience a meaningful reduction in tax burden, potentially amounting to thousands of shekels annually, while those in lower and middle deciles will see negligible relief. “Reducing the tax burden on the middle class is a welcome idea that the Histadrut supports, but in 2026, the burden is distributed in an unbalanced and unfair manner on the working public,” Blumenberg emphasized.

Blumenberg further noted that this distortion is particularly severe given that public sector employees have already contributed to stabilizing the fiscal situation during wartime, absorbing a 2.48% salary cut this year and an additional 1.2% next year. “The public sector was the first to shoulder the burden, and therefore, if tax adjustments are being made, those who gave first should also be the first to receive,” he wrote.

It is worth noting that in the 2025 budget, the Histadrut and the Finance Ministry reached several agreements in light of the fiscal challenges posed by the war, including freezing income tax brackets, a move that eroded real wages for all workers. In its letter, the Histadrut calls for an urgent discussion on the matter and urges the ministry to consider steps that would provide genuine relief to lower and middle-income groups, such as partially or fully reversing public-sector wage cuts or lifting the freeze on tax brackets set for 2025–2027.