National Histadrut labor union leader Ofir Eini has threatened to shut down the country with a strike if the Cabinet approves the proposed 2009 budget at its next meeting on Sunday. The Finance Ministry proposal includes widespread cuts in spending on defense and social service programs.
"I intend to warn the Cabinet ministers on the danger inherent in approving the budget," he said. "I hope the ministers will not raise their hands in favor of the proposal because it will cause a layoff of workers and instability in the economy."
A Histadrut strike could affect the Prime Minister's Office, as well as the Interior, Transportation, Education, Foreign, Welfare, Defense and Health Ministries, the Tax Authority, the Israel Land Administration and Bank of Israel offices. The effects also would be felt at government hospitals, the Israel Broadcasting Authority, the National Insurance Institute, the Postal Authority, the Electric Company and Ben-Gurion Airport, among other government institutions.
The Histadrut had threatened in June to walk out if the Finance Ministry carried out a plan to eliminate a tax exemption on an employees' savings fund. The exemption on the health fund (kupat kholim) tax and National Insurance Institute (Bituach Leumi) tax would not have been affected.
Ultimately, the tax, which was part of Finance Minister Ronnie Bar-On's proposed tax reform package, was scrapped.
Under the plan, income tax would be slashed from 16 percent to 11 percent for Israelis in the lowest income bracket, earning NIS 4,390-7,810 per month. Those who earn NIS 7,810-11,720 would pay 17 percent income tax, instead of 26 percent. Those who earn NIS 11,720-16,480 per month would pay income tax of 25 percent, instead of 33 percent. The top tenth percentile would pay 46 percent, instead of 47 percent income taxes, in 2009.
By the year 2015, under Bar-On's tax reform plan, the maximum income tax would be 42 percent.