In mid-2024, a graph revealed that Israel serves as a conduit, transferring money from non-haredi to haredi (ultra-Orthodox) Jews. The study sparked debate, and experts say the gap has only grown over the last year and a half.
The study, titled “On Taxes and Wonders” and written by Ariel Karlinksy, Tom Sade, Eran Yogev, and Dr. Michael Sheral from the Economic Department of the Kohelet Forum, was published in the Israel Economic Review. It mapped, for the first time comprehensively, all that Israeli citizens give to the state and all that they receive from it.
What made the study unique was that it didn’t just examine income tax versus allowances like other studies, but also looked at indirect taxes such as VAT, excise tax, corporate tax, and various fees on one side, and subsidized public services such as education, health, and public housing on the other. The study allocated these to households based on their share of benefits.
The conclusion was that while, on average, each non-haredi Jewish household pays the state 6,114 shekels per month, a haredi household receives 4,137 shekels per month from the state – an over 10,000-shekel gap.
The study caused quite a stir at the time, but according to updated data presented by Dr. Michael Sheral, former chief economist at the Finance Ministry and now head of the Kohelet Forum for Economics (and, full disclosure, my former boss), this gap has not shrunk in the last year and a half – it has grown.
The original study was based on data from 2016 to 2018. However, when updating the data to 2026, following the same methodology but adjusting to the current economic reality – government revenues and expenditures were projected according to Israel’s nominal GDP, meaning based on the monetary growth of economic activity, and household data was updated per nominal GDP per capita – it turns out that, in 2026 terms, a haredi household receives a net average of 5,983 shekels per month from the state, while a non-haredi Jewish household pays a net 8,842 shekels per month – almost a 15,000-shekel gap.
Solution to Israeli financial crisis is broad structural change
The solution, according to Dr. Sheral, is not another patch in the budget but a broad structural change addressing the roots of the Israeli paradox.
In a recent policy paper titled “Two Types of Inequality – The Israeli Paradox,” he proposes viewing the education system, labor market, taxation, housing, and military service as one integrated system, advocating for combined reforms that will increase the number of contributors to the economy and reduce dependency on transfers.
In his view, without such a move, the imbalance will only worsen as the share of the population not fully participating in the labor market continues to grow.
At the heart of the recommendations is a call to expand core studies across all education systems, alongside reducing public funding for frameworks that do not prepare students to integrate into the modern economy. Simultaneously, he calls for increased employment incentives, reducing benefits that encourage childbirth without sufficient economic means, and expanding mandatory military service so that the security burden is more equitably shared.
Sheral also emphasizes the need for deep efficiency improvements in the public sector and a reform of the tax and regulation systems. He asserts that tax simplification, the elimination of sectoral exemptions, reduced bureaucracy, and the opening of markets to competition will lower the cost of living and reduce the “double payment” by the middle class. He claims that only such an integrated package can reduce both income inequality and the inequality in burden, while maintaining Israel’s social cohesion in the long term.