TAX CREDITS FOR SPECIFIC LOCALITIES: ECONOMIC AND POLITIC ASPECTS WITH SPECIAL REFERENCE TO THE NEGEV LAW
Tax credits to taxpayers in areas of national priority are one of the methods of dispersing the population and narrowing socioeconomic gaps between regions.
In 2001, 478 localities with a total of about 1.2 million residents were granted such tax relief. The total cost was NIS 2.03 billion, with great geographical differences: the southern region (the Negev Law zone) received NIS 1.2 billion (or NIS 1,988 per capita), the total for the north came to NIS 0.6 billion (NIS 1,504 per capita), and Jewish settlers in Judea, Samaria and the Gaza Strip received about NIS 0.2 billion (NIS 997 per capita).
In 2000–01 fourteen northern rural localities, such as those close to the Israel–Lebanon border, were granted tax credits. The probability of receiving such credits was higher for those localities close to the border, and for those politically heterogeneous ones, a finding consistent with that of the median-voter model.
The quality of the estimate that incorporates variables relating to representatives of the localities in the central party caucuses was better than that which included broadly bipartisan voting in general elections. This may derive from internal party considerations such as success in internal elections outweighing general election ones.
The Negev Law introduced at the beginning of 2001 set differential tax credit rates for different municipalities. This research suggests that the rates determined satisfy the following apolitical criteria: the lower the socioeconomic grading of the local authority, the higher the credit rates; the tax credit rises at a reducing rate the greater the distance of the locality from a large city; population size is negatively related to tax credit - the cost of the credit may act as a deterrent to setting high rates for large population centers.
Political factors had statistically significant but not meaningful effects on the rates of tax credits determined for the Negev; some parties apparently succeeded in raising the rate for their traditional voters in the municipalities covered by the Negev Law beyond the level that would be expected based on their apolitical features. Heterogeneity in general election voting of the local authorities residents and their representation in the electoral bodies of the parties at both ends of the political spectrum had no effect on the rates of tax credits.