US Considers Redirecting Israeli-Held Palestinian Tax Funds to Gaza Rebuilding

The U.S. is considering asking Israel to redirect some of the tax revenues it withholds from the Palestinian Authority toward funding President Donald Trump's post-war plan for Gaza, according to five sources familiar with the matter. The Trump administration has not yet decided whether to make a formal request to Israel, three officials with knowledge of the deliberations said.

The proposal under discussion would send a portion of the funds to a U.S.-backed transitional government for Gaza while directing other money to the Palestinian Authority if it implements reforms. The Palestinian Authority estimates the amount of tax revenue currently being withheld at $5 billion.

The prospect of repurposing these funds, which originate from Palestinian taxpayers, could further sideline the Palestinian Authority in any governance arrangements for Gaza. Discussions remain at an early stage. The two Palestinian sources with knowledge of the deliberations described the potential arrangement as one element of broader talks between the U.S. and Israel on Gaza's future.

Israel collects tax revenues on behalf of the Palestinian Authority and has periodically withheld transfers during periods of heightened tension. The current withholding totals an estimated $5 billion according to Palestinian figures. Any redirection of these funds would require coordination between Israel, the U.S. and any transitional body established for Gaza.

Officials have not detailed the exact split between a transitional government and the Palestinian Authority under the proposal. The idea forms part of ongoing U.S. efforts to shape reconstruction plans following the end of major hostilities in Gaza.

No final decisions have been made on the structure of governance or funding mechanisms.

Redirecting the tax money could reduce the Palestinian Authority's financial leverage and influence over Gaza's reconstruction. Palestinian officials have expressed concern that such moves would marginalize the Authority further in decisions about the territory's future.

The proposal envisions a transitional government backed by the U.S. taking a leading role in rebuilding efforts. Details on the composition or authority of that body have not been disclosed. Talks between U.S. and Israeli officials continue as both sides assess the feasibility of the funding shift.

The Palestinian Authority has not publicly commented on the specific proposal reported by the sources.

“The U.S. is considering asking Israel to give some tax money it is withholding from the Palestinian Authority to U.S. President Donald Trump's Board of Peace to fund his post-war plan for Gaza." — Reuters, May 16, 2026 The Trump administration has outlined a broad vision for Gaza that includes significant rebuilding, though specifics on financing and governance remain under discussion. The tax revenue proposal represents one possible mechanism under review.”