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Israel: Increasing Participation in Workforce by Negative Income Tax

(Jan. 2, 2008) On December 18, 2007, the Knesset (Parliament) passed the Law for Increasing Participation in the Workforce and Minimizing Social Gaps (Negative Income Tax), 5768-2007. The Law provides special grants to a worker who has dependant children or who has reached 55 years of age at the end of the tax year. Excluded from those who qualify for the grants are persons who either earn above a certain annual income; own possess or use certain property determined by the Minister of the Treasury; or own, or have a spouse or dependant child who owns, at least 50 percent of a real property, not including a single residential unit, either in Israel or abroad. The amount of the grant may be lowered if the worker or his spouse earns additional income.

The Law aims to eliminate poverty and improve the welfare of working families. According to the explanatory notes accompanying the bill, an investigation of the causes of poverty in Israel indicated that the central cause is the low rate of employment among the poor. It was found that the poverty rate among families with two workers was only three percent. The government proposed the bill in order to encourage families to enter the workforce. (Law for Increasing the Participation Rate in the Workforce and for Minimizing Social Gaps (Negative Income Tax), 5768-2007 and bill, Knesset Web site (last visited Dec. 19, 2007).)