U.S. Foreign Aid to Israel

There is a relatively recent Congressional Research Service review of U.S. Foreign Aid to Israel. I quote from that review:

Israel is the largest cumulative recipient of U.S. foreign assistance since World War II. To date, the United States has provided Israel $115 billion in bilateral assistance. Almost all U.S. bilateral aid to Israel is in the form of military assistance, although in the past Israel also received significant economic assistance. Strong congressional support for Israel has resulted in Israel receiving benefits not available to any other countries; for example, Israel can use some U.S. military assistance both for research and development in the United States and for military purchases from Israeli manufacturers. In addition, all U.S. assistance earmarked for Israel is delivered in the first 30 days of the fiscal year, while most other recipients normally receive aid in installments. In addition to receiving U.S. State Department-administered foreign assistance, Israel also receives funds from annual defense appropriations bills for joint U.S.-Israeli missile defense programs. 

In 2007, the Bush Administration and the Israeli government agreed to a 10-year, $30 billion military aid package that gradually will raise Israel’s annual Foreign Military Financing grant from a baseline of nearly $2.55 billion in FY2009 to approximately $3.1 billion for FY2013 through FY2018. For FY2013, the Obama Administration is requesting $3.1 billion in FMF to Israel.

Note that the report is not measuring the present value of that aid. If a person had contributed $113 thousand to a retirement account over many years, the current value of that account would be considerably greater since presumably it would have accrued interest over that time. For example, if you put $3,000 per year in a retirement account every year for 40 years, earning five percent interest per year, the value at the end of that time would be not $120,000 but more than $340.000.

A recent book states:

Israel receives an estimated $2 billion annually in private donations from American citizens, roughly half in direct payments and half via the purchase of State of Israel Bonds. These bonds receive favorable treatment in U.S. law; although the interest paid on them is not tax-exempt, Congress specifically exempted them from the provisions of the 1984 Deficit Reduction Act, which imposed additional tax penalties on other bonds with yields below the federal rate. Similarly, private donations to charities in most foreign countries are not tax deductible, but many private donations to Israel are, due to a special clause in the U.S.-Israel income tax treaty. 

Because Israeli charities operate beyond the reach of U.S. tax authorities, donations from Jewish and Christian evangelical organizations are hard to monitor once they are transferred to Israel. In practice, therefore, the U.S. government cannot easily determine the extent to which tax-exempt private donations are being diverted for unauthorized purposes.

The taxes that donors to Israel avoid by making their donations to Israel can be regarded as "tax financing" or another form of government contribution to Israel and Israeli organizations.

There are other forms of U.S. government aid to Israel which are not included in the above figures, notably those which help Israeli businesses link with U.S. counterparts or export into U.S. markets.

Considering that Israel has a population of some 7.5 million, the United States taxpayer has made a huge contribution to the wealth of the people of Israel. The median net worth of American families in 2010 was $77,300. Had Israel put an equivalent to the aid it receives from the U.S. government in good investments and let the value of those investments grow normally, the current value of those investments per Israeli family would be much more than the median net worth of American families.