Municipalities and local authorities nationwide threatened to go on strike beginning Monday over the government’s plan to start a “City Tax Fund,” which would take a percentage of earnings of wealthy municipalities to assist poorer ones.
The Federation of Local Authorities in Israel chairman Haim Bibas announced the threat on Sunday morning at the end of what he described as an “emergency” meeting.
The strike was not officially announced by press time, but mayors and regional council leaders said they would follow through with the strike if the fund was not taken out of the Budget Law.
Numerous cities threaten to strike
Cities and local authorities that said that they would participate include Haifa, Rishon Lezion, Modi’in, Yavne, Beit She’an, Tiberias, Herzliya, Ra’anana, Ramat Hasharon, Gilboa Regional Council and South Sharon Regional Council, according to KAN.
Hof Carmel Regional Council and Kfar Saba said that if the strike is made official, they will join as well.
The regional councils in the Gaza border area announced that they would not participate in the strike, as many services had already been closed for a number of days last week due to Operation Shield and Arrow. The Jerusalem Municipality announced that it, too, would not participate.
The strike will include services such as preschools, sanitary services, garbage collection and security services, the latter of which could also lead to a closure of elementary schools, according to Channel 12.
The fund’s stated purpose is to lower housing prices. According to law, commercial real estate pays higher city taxes than residential real estate – and therefore cities are incentivized to allocate land for commercial construction. This lowers the supply of residential housing, and thus raises their price.
The new fund will appropriate part of the earnings of wealthier cities from their tax on commercial real estate, and reallocate the funds to poorer cities for every housing unit they build. By doing this, the government hopes to incentivize both wealthier and poorer cities to invest in housing instead of commercial real estate, and thus raise the supply of housing, and, eventually, lower home prices.
Opposition MKs and a number of mayors and local authority leaders vehemently opposed the plan in recent weeks and continued to do so on Sunday in tense debates in the Knesset Finance Committee. They made at least four arguments:
First, that the Finance Ministry would end up using the funds for other purposes, or as a guarantee for other spending. Governments have done this in the past in similar cases.
Second, that the plan incentivizes poorer cities to build housing as opposed to commercial real estate, and thus lower incentives to create new business centers and industrial parks in peripheral or poor areas.
Third, that the fund would de facto end up discriminating against Arab cities and towns, since these cities suffer from insufficient urban planning and therefore from insufficient construction – and therefore will receive less of the fund.
Fourth, that local authorities in the West Bank would be exempt from allocating portions of their earnings to the fund due to legal issues over the status of the West Bank.
Tensions between local authority leaders and gov’t officials, which had been simmering for weeks, erupted on Sunday despite reports late Thursday about an agreement between Bibas and Finance Minister Bezalel Smotrich.
Bibas explained in the Knesset Finance Committee on Sunday that he had agreed to a watered-down version of the plan last week only because his back was to the wall, as the fund, which is part of the Economic Arrangements Law that accompanies the budget, was about to be approved by the Finance Committee. However, he still strongly opposed the plan and that was why he had backed out.
Smotrich responded by holding a press conference just before primetime on Sunday in which he accused Bibas of backing out for political reasons, and called on his fellow coalition members not to cave to the “threats and violence” by the local authority leaders.
“The days in which we surrender to special interest groups are over,” Smotrich said. “There are 10 local authority heads who declared war against lowering the high cost of housing. As long as they have peace in their small corner of heaven, you will pay, we will all pay. No more!” Smotrich added.
Smotrich countered some of the opposition’s claims in a statement earlier on Sunday and again later at the press conference. The claim that the Finance Ministry would use the funds for other purposes was an “absolute lie,” since the law included a clause that said that “not even one shekel” will remain in the national coffers, as any leftover funds would be returned to the cities from which they were taken, the finance minister argued.
In addition, the percentage of the earnings that wealthier municipalities will need to pay is relatively small, and the alternative to taking funds from their earnings was to raise city taxes for residents, which the finance minister said he was unwilling to do.
Student activists and other protesters demonstrated outside of the Knesset against the fund on Sunday, arguing that it “aims to concentrate an enormous amount of power in the hands of the government.”
“Though the government’s judicial overhaul is supposedly delayed, this coalition proves yet again that its main objective is to strengthen itself through diversion of resources, and obtain unchecked power for the government and its allies,” representatives of the protesters said.