US Considers Redirecting $5 Billion Palestinian Tax Funds for Gaza Reconstruction Plan

United States is considering asking Israel to redirect part of approximately $5 billion in withheld Palestinian tax revenues toward Donald Trump’s proposed Gaza reconstruction plan. The funds are currently collected by Israel on behalf of the Palestinian Authority (PA) and have been withheld in an ongoing dispute.

Five sources familiar with the discussions said the idea is under consideration but no formal request has been made yet. The proposal could involve transferring part of the money to a U.S.-backed transitional body called the Board of Peace, which is linked to Trump’s post-war Gaza strategy.

Financial pressure on Palestinian Authority deepens crisis

The Palestinian Authority relies heavily on these tax transfers to pay civil servants and run public services. Withholding the funds has already created a major financial crisis in the West Bank, forcing salary cuts and weakening governance capacity.

Officials say Israel collects taxes on imported goods for the PA under a long-standing agreement, but disputes over payments to prisoners and families of those killed in conflict have led to continued freezes. The PA says these payments are social welfare, while Israel and the U.S. argue they encourage violence.

Political tensions over Gaza governance plan

The U.S. “Board of Peace” says all parties, including Israel and the PA, should contribute resources to rebuilding Gaza, estimated to cost around $70 billion. However, the PA was reportedly not invited to join the board, raising concerns about political exclusion.

The plan envisions Gaza being run by Palestinian technocrats after Hamas lays down arms, but progress remains stalled due to ongoing conflict and political disagreements.