Study: Ultra-Orthodox only pay 4% of total national taxes, costing economy billions

Non-Haredi workers set to pay an additional average NIS 3,540 in taxes in 2025 due to low ultra-Orthodox employment, researcher finds

The Times of Israel/May 20, 2025

By Sam Sokol

Despite constituting 14 percent of the working-age population, the ultra-Orthodox community generated only four percent of Israeli tax revenues in 2023, costing the government billions and adding thousands of shekels to the average non-Haredi worker’s annual tax burden, a study by the Israel Democracy Institute has found.

Should current demographic and employment trends continue, by 2048 about a quarter of Israel’s population will be Haredi but will, in aggregate, contribute a mere 8% of direct tax revenues, the IDI projected.

According to the study — which was based on data from the Central Bureau of Statistics, Tax Authority, Population Authority, and National Insurance Institute — the lack of secular studies in Haredi schools has led to “underperformance in the labor market and significantly lower household incomes relative to the general Jewish population, especially among men.”

As a result, it asserted, “despite consuming more state services, Haredi households pay less in income taxes.”

Fifty-four percent of Haredi men were employed in the first three quarters of 2024 compared to 55.5% in 2023. For women, employment rates have risen steadily from 71% in 2015 to 81% in 2023, only 2% less than non-Haredi women.

According to the Knesset Research and Information Center, members of the ultra-Orthodox community currently enjoy a range of benefits, including reduced fares on public transit, housing assistance and municipal tax discounts.

In addition, as of January 2024, around 71% of nearly 200,000 Haredim registered in Torah institutions paid reduced National Insurance Institute contributions, leading to an annual loss of NIS 99.1 million ($26 million) in revenue for the social security agency.

Overall, only 23% of Haredi men and women pay income tax, versus 62% of non-Haredi Jewish men and 46% of non-Haredi Jewish women, the IDI study found.

In addition, if the ultra-Orthodox would participate in the workforce at similar rates to their non-Haredi counterparts, they would generate an additional NIS 9.5 billion ($2.6 billion) in additional direct labor tax revenue, rising to NIS 44.6 billion ($12.6 billion) by 2048.

According to the IDI’s calculations, in 2025 non-Haredi workers will pay an additional average NIS 3,540 ($1,000) in taxes “as a consequence of low Haredi workforce participation,” a figure expected to rise to NIS 11,266 ($3,192) by 2048 if current trends continue.

“This is unsustainable — the demographic trends and the fact that they don’t contribute to the army and also to the economic structure. It’s just not feasible,” IDI researcher Gabriel Gordon, the author of the study, told The Times of Israel in a recent telephone interview.

“To put it mildly, incentives are not in the right places if you want to make changes,” he said, referring to the current system of subsidies and budgets enjoyed by the Haredim.

Gordon also asserted that his research undercut claims by Haredi representatives that their community actually contributes more than it receives from the government.

“I don’t understand the claim that says that if you don’t work and if you do work, the taxes that you pay are the same,” Gordon said, citing not only his own research but a recent report by the conservative Kohelet Policy Forum, which found that 80% of Haredi households receive more from the government than they pay in taxes.

Overall, according to Kohelet, Haredi families receive an average of over NIS 4,000 monthly while non-Haredi families pay more than NIS 6,000 into the system, including indirect taxes.

Speaking with The Times of Israel about the 2025 state budget last month, United Torah Judaism MK Moshe Roth argued that the majority of the government’s tax revenue does not come from income tax but rather from sales tax, apartment purchases and other sources, so that “there’s no difference between those that work and those that don’t work” in terms of how much tax revenue they generate.

“The Haredi people are being slandered, are being delegitimized,” he said at the time.

Roth’s view reflects that of the majority of the Haredi community. According to a 2023 poll commissioned by financial daily The Marker (Hebrew), 87% of Haredim believe that their economic contribution is similar to or exceeds that of other population groups.

The Israel Democracy Institute and Kohelet Policy Forum’s studies are not the only recent research to determine that the current status quo regarding the Haredi community has a high economic cost.

According to a 2024 Finance Ministry internal analysis, even before the October 7, 2023, onslaught by Hamas terrorists, the lack of workforce participation by members of the ultra-Orthodox community cost the economy tens of billions of shekels annually, and the added burden of service placed on reservists by their exemption from the IDF is expected to cost billions more in the future.

Citing defense establishment estimates, the Finance Ministry’s budget division stated that “the current security needs place a heavy burden” on the reservists, requiring hundreds of thousands of them to serve up to 60 days and costing around NIS 30 billion ($8.2 billion) annually.

Ultra-Orthodox Israelis block a road and clash with police during a protest against the drafting of Haredi men to the military, in Ramat Gan, December 24, 2024. (Itai Ron/Flash90)
“There is a definite economic need to increase the scope of recruits to the IDF from this population in the broadest possible way,” the paper asserted.

In a letter sent to the Knesset Foreign Affairs and Defense Committee in February, Yogev Gardos, the head of the ministry’s budget department, argued for the implementation of hard-hitting, long-term sanctions on Haredi draft dodgers.

According to Gardos, benefits that could be cut under a sanctions regime for draft dodgers include daycare subsidies, yeshiva stipends, discounts on National Insurance Institute payments, housing subsidies and property tax discounts.

Both daycare subsidies and stipends for yeshiva students eligible for IDF enlistment have been cut since last year.

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