Child allowances, subsidies, and tax breaks for young families in Israel are less than other advanced economies, according to a study by Bank of Israel Research Department researcher Dr. Adi Brender and Hebrew University of Jerusalem's Prof. Michel Strawczynski.
The study found that the cash benefits provided in Israel, for instance in the form of tax credits or child allowance payments, are markedly lower than their level in almost all other OECD countries, particularly for working families in the lower part of the income distribution. In parallel, the services to families with children, and other benefits such as tax deductions in respect of child expenses, are also no higher in Israel than in the other countries. The three main characteristics of the tax and grants system in Israel that lead to the low level of assistance are the focusing of tax credits in respect of children on mothers, the limited scope of the Earned Income Tax Credit program, and the relatively low level of child allowances.
The study found that the difference between Israel and other OECD countries amounts to 4% of income, Strawczynski told "Globes". "The study found that, since 2003, the proportion of households with a child up to nine years old has risen 57% from 21% to 33%. From 2007, during which home prices have risen by 70%, the increase is 27% in just four years (from 26% to 33%). In other words, it seems that Israelis aren’t waiting for government housing solutions, and are voting with their feet."
The study found that young families are the main victims of the real estate bubble, because their limited liquidity is reflected in the housing market. When home prices rise, the proportion of young families who rent rises markedly (up 15% over the past decade); this relationship is almost completely absent among other families.
The study also criticizes child tax credits for working mothers. It found that half of working mothers do not utilize these credits because their incomes are too low, or because they do not participate in the labor market, and another quarter of mothers only partly utilize the tax credits. A total of 81% of mothers do not or only partly utilize child tax credits.
The study found that prices for goods and services consumed by young families did not increase more than the prices of the products and services consumed by the rest of the public in the past two decades. However, the parents' income in households with young children is less than when the children are older. An assessment of all families found that the additional expenses are particularly high in respect of children aged 0-3 and 15-17.
Published by Globes [online], Israel business news - www.globes-online.com - on April 30, 2014
© Copyright of Globes Publisher Itonut (1983) Ltd. 2014