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This document includes Zulat’s comments to the “National Insurance” chapter in the Economic Efficiency Draft Law (Amendments to Attain Budget Goals for Fiscal Year 2025), which deals with the increase of the national insurance tax to be paid by a large segment of the Israeli public, in parallel with a sharp decrease in the allocation out of this tax collection to the National Insurance Institute (NII).
The NII is one of the most important foundations of the Israeli welfare state and its independence is its soul. The NII Law was designed to divorce the basic social rights of Israelis from changeable policies, political interests, and budgetary hardships by creating a fund separate from the state treasury to ensure those social services.
The NII operates simultaneously as an insurance entity paying contribution-based allowances and as a state agency disbursing social security benefits that are not backed by revenues and are funded directly from the state budget. This blending of functions has enabled the Finance Ministry to impose its authority over the NII, requiring the latter to comply with its directives in order to secure the budgets it needs for its proper functioning.
The proposal outlined in the aforementioned draft law amounts to an increase in regressive taxation that would particularly harm low-income earners and would primarily reduce the allocation of collected taxes to the NII, thereby critically undermining its stability. These steps would accelerate the NII’s path toward insolvency, effectively dismantling the social security system of Israelis. They would also deepen the discrimination against Israel’s working population and increase the economic burden on them.