Knesset Approves 0% Tax On Knesset Member Salaries

Jerusalem, September 17 – Amid tensions in the governing coalition over the fate of a law meant to eliminate the Value Added Tax on certain purchases of a home, the government and Knesset lawmakers showed no such hesitation in instituting an exemption from income tax of the salaries of members of Knesset.

The Government Remuneration Euchre Exemption Decree (GREED) of 2014 sailed through its preliminary reading, committee deliberations, second, and third readings in the space of two weeks, record time for a piece of Knesset legislation. It eliminates the withheld income tax on the base Knesset salary of 38,250 shekels per month, about $10,500. MKs who voted for GREED expressed relief at its passage, noting how difficult it was to survive in the current economy on so little.

Previously, any amount beyond 10,000 shekels per year was taxable at a 49% rate, leaving each MK with a paltry 267,000 shekels per year, which is only four or five times the average household income in the country. Restoring the gross salary amount will go a long way toward addressing the financial challenges that face each MK, says the law’s sponsor, Yuli Edelstein of Likud. “The grueling workday of up to three hours, three days a week can take a real toll on a person,” he explained. “This country needs to do a better job of compensating its lawmakers for the time, energy, and effort they put into their work.”

The picture was less bleak for cabinet ministers, whose salaries were already higher than those of the rest of their colleagues, but they, too, will benefit from GREED. The additional budget that each MK is allocated will also remain untouched, so that some other necessary expenses will still be covered. These include the salaries of at least two parliamentary aides, office space, accommodations in Jerusalem if necessary, certain wardrobe and food costs, phone lines, computers, communication expenses, postage, a leased luxury car, furniture, foreign language studies, travel, and newspaper subscriptions, among others. Such allocations were never taxed, as they were not paid directly to the MK.

A previous version of GREED in 2009 foundered amid disagreements over the inclusion of working class incomes in the exemption, a feature that eventually doomed the bill to failure. “In retrospect, we really should have cut out that item,” recalls co-sponsor Eli Yishai of Shas. “It was conceived as a bone we could throw to our constituency, but it might have confused the public over lawmakers’ priorities, so it’s a good thing that law never passed.”