Israeli MK forcibly removed from committee over City Tax Fund debate

Yesh Atid MK Idan Roll was removed by force from a session at the Knesset Finance Committee at the orders of committee chair MK Moshe Gafni amid a discussion on the controversial City Tax Fund, after he claimed that he could not be removed since votes were taking place.

According to Knesset protocol, committee chairs may remove MKs after they receive three calls to order. However, during votes, MKs must be given the opportunity to be replaced by backups. Roll said that no backups were available, but he was removed regardless, seemingly in violation of Knesset protocol.

Gafni enabled Roll to return after the commotion died down and continue voting.

The debate over Israel's City Tax Fund

The votes were on thousands of reservations that opposition MKs filed against the controversial Fund, which is part of the Economic Arrangements Law – a law that accompanies the national budget, and enables the government and coalition to implement the budget.

The fund, which is being promoted by Finance Minister Bezalel Smotrich, states its purpose is to lower housing prices. According to Israeli law, commercial real estate pays higher city taxes than residential real estate – and therefore cities are incentivized to allocate land for commercial construction. This lowers supply of residential housing, and thus raises the price.

According to the new plan, the fund will appropriate part of the earnings of wealthier cities from their tax on commercial real estate, and reallocate the funds to every housing unit that is marketed, no matter where. By doing this, the government hopes to incentivize both wealthier and poorer cities to invest in housing instead of commercial real estate, and thus raise the supply of housing, and, eventually, lower home prices.

Many opposition MKs and dozens of local authority leaders vehemently opposed the plan in recent weeks and continued to do so on Monday, for a number of reasons.

First, the Finance Ministry would eventually change the bill and then use the funds for other purposes, or as a guarantee for other spending. Israeli governments have done this in the past in similar cases.

Second, the plan incentivizes poorer cities to build housing as opposed to commercial real estate, and thus lower incentives to create new business centers and industrial parks in peripheral or poor areas.

Third, the fund would de-facto end up discriminating against Arab cities and towns, since these cities suffer from insufficient urban planning and therefore from insufficient construction – and therefore will receive less of the fund.

And fourth, local authorities in the West Bank would be exempt from allocating portions of their earnings to the fund due to legal issues over the status of the West Bank.

Smotrich and Federation of Local Authorities in Israel chairman Haim Bibas reportedly reached agreements last week, but Bibas on Sunday retracted his agreement, claiming that he only agreed because his back was to the wall, as the fund was about to be approved by the committee. Smotrich, however, argued in a press conference on Sunday evening that Bibas had been pressured by special interest groups into changing his mind. Smotrich did not provide proof of this claim.

National Unity chairman MK Benny Gantz addressed the issue in a press conference prior to his party's weekly meeting on Monday.

The program was a "de facto tax hike" based on "sectorial and geographical" considerations, Gantz said, explaining that all local authorities that will be forced to contribute to fund will need to compensate by either raising residential city taxes or by canceling services, which residents will then need to pay more for.

Opposition leader and Yesh Atid chairman MK Yair Lapid also addressed the issue in his comments ahead of his party's weekly meeting.

"Theft is a strong word, but I have no other. The government is coming and seizing money from local authorities whose only sin is that they are managed well, and whose residents work and pay taxes," Lapid said.

"The 'Arnona [City Tax] Fund' is not a fund, it is robbery in broad daylight," Lapid added, arguing that this characterized the entire budget, which was a "distribution of plunder by an irresponsible government that is extorting a weak prime minister. The local authorities' strike is unquestionably justified and we support," he said.