In 1978, Shimon Peres wrote in his book, Tomorrow is Now, “If a Palestinian state is established, it will be armed to the teeth. Within it there will be bases of the most extreme terrorist forces, who will be equipped with anti-tank and anti-aircraft shoulder-launched rockets, which will endanger not only random passers-by, but also every airplane and helicopter taking off in the skies of Israel and every vehicle traveling along the major traffic routes in the coastal plain.” Sixteen years later, he orchestrated an agreement to fund the PLO state.

Tax transfers to Palestinians are rather unusual economically. Under the 1994 Economic Cooperation (!) agreement, Israel undertook to tax Palestinian migrant laborers and transfer the proceeds to the PLO. The situation was more complex. Legal migrants have always paid Israeli income tax and for years have paid social security tax, as well. Jewish trade unions were the Palestinians’ best advocate because the absence of taxation made Palestinian labor ultra-competitive compared to Jewish labor. Under the 1994 agreement, Israel released the accumulated social security funds to the PLO, which predictably stole them. Social security savings are generally understood to be the employee’s property, so Israel couldn’t claim them. We would slightly prefer the laborers, rather than the PLO, to spend their pension funds, on the assumption that hard-working Palestinians are somewhat less likely to engage in terrorism. The difference is not critical, and if the Arabs appointed the PLO, and the PLO stole their money, it’s all up to them. Still, it remains questionable whether Israel should levy social security taxes on Palestinian migrants. The payments come from Jewish contractors, are therefore included in the price, and ultimately are paid by Jewish consumers. There is little reason for common Jews to subsidize the PLO.

It is still worse with Palestinian income tax. In economic theory, income tax is a franchise fee a state levies for the right to work on its territory. Palestinians flock to work in Israel rather than Jordan, and pay income tax for that privilege. When a French citizen comes to work in the United States, he pays income tax to the US Treasury, and no part of it is transferred back to France. Naturally, it is the French citizen who pays for the right to be employed in America, rather than the United States which pays France for the right to hire its citizen. So the Israeli “tax transfers” to the PLO are not transfers in any sense, but outright subsidies. It is a truism that the PLO uses Israeli subsidies to pay the salaries of its vast militant wings, including Al Aqsa Martyrs’ Brigades, which continually attempt terrorist acts against Israel.

Israeli tax transfers are the major source of the PLO’s livelihood. Arab countries promise much aid but deliver only a trickle. European and American aid is mostly channeled to refugees, though it now increasingly goes toward training Fatah guerrilla forces. Israeli money is the spare cash which the PLO relies upon for its core anti-Israeli activities.