The Bitterest Bill: How Will the Religious Budget Transform Israel’s Economy?

The Israeli news website “Walla” recently published an article by its political correspondent Tal Shalev, stating that following the Knesset’s approval of the government’s budget, the right-wing coalition has become significantly more stable, leaving only one practical method to bring down the government—gathering a majority vote in the Knesset.

Shalev noted, “Now, the only viable path to topple the government is through securing a 61-member majority in a constructive vote of no confidence.” However, given the coalition’s current assured majority of 67 members, the opposition’s ability to achieve this appears almost impossible.

“Passing the budget has eased tensions that briefly emerged with the ultra-Orthodox (Haredi) factions due to delays in approving the military service exemption law,” Shalev added. Prime Minister Benjamin Netanyahu reportedly held discussions with Haredi rabbis, leading to the decision to postpone addressing the exemption issue until the Knesset’s summer session, anticipating renewed coalition tensions down the line.

The budget, now the largest in Israel’s history at 620 billion shekels, allocates over five billion shekels to coalition funds, addressing the sectoral demands of Haredi and religious Zionist groups. It also includes several new regulations, tax increases, and significant cuts to public services.

Liam Adiv, writing for “Maariv,” highlighted the impact of this budget, arguing, “All Israelis will bear the cost of approving the budget in its current form. Despite being the largest budget in the state’s history, it ironically contains minimal positive economic news.”

Adiv continued, “The budget primarily channels more funds to military service evaders and injects billions into coalition party interests, illustrating the absurdity of this budget.”

“The Knesset’s approval of the budget in its second and third readings serves as a stark reminder that this budget doesn’t support Israel’s economic needs, as most resources have been redirected to meet the right-wing coalition parties’ sectoral demands, ensuring their political stability,” he emphasized.

“At the expense of all Israelis, 5.4 billion shekels have been earmarked as coalition funds, while not a single unnecessary ministry was closed. Instead, heavy economic cuts were imposed on the public,” the article detailed.

It further noted, “The new budget has frozen income tax brackets, reduced employee convalescence benefits, and significantly cut funding for education, social welfare, and health. This partial list highlights negative impacts on every working, tax-paying Israeli.”

“This distorted budget increases the burden on taxpayers, exempts military service evaders, and does not hold them accountable. Coalition parties evidently have no qualms about approving a budget that incentivizes evasion of military service,” Adiv argued.

He added, “Another distortion includes allocating 1.3 billion shekels to Torah institutions, 28 million shekels to prevent dropout rates in religious schools, and 70 million shekels to support ultra-Orthodox Jewish culture.”

“These allocations further clarify that the budget holds no promising news for the Israeli economy, predicting a deficit jump to 4.9%, effectively contradicting Finance Minister Bezalel Smotrich’s earlier promise to reduce the deficit.”

While passing the budget represents a political victory for Prime Minister Netanyahu and his ruling right-wing coalition—successfully navigating numerous political hurdles—from an economic and civic perspective, this budget offers little benefit. The significant funding directed toward the coalition and incentives for tax evasion mean that the real losers of this budget are the Israeli public themselves.