The Palestinians ritually demand a right of return to land and property inside Israel that was abandoned by their ancestors as a result of the 1948 Israeli War of Independence. The Jewish state, which currently has a Palestinian minority of 20%, rejects a Palestinian right of return.
The United Nations Conciliation Commission for Palestine (UNCCP) estimated in 1964 that the value of 1948 Palestinian refugee property losses, in 1947-1948 dollars, was $824,780,808 (Michael Fischbach, Jewish Property Claims Against Arab Countries). This is an enormous sum which is over ten times as large in 2019-2020 dollars. The UN made no comparable estimate for property lost by Jewish refugees from Arab countries after the 1948 war. Israel may be willing to pay compensation for the loss of Palestinian property provided that Arab governments pay compensation for the loss of Jewish property in Arab countries.
Israel would certainly profit by reducing the size of a Palestinian compensation fund. To achieve this objective, Israel could impose a large monetary fine after every Palestinian assault against residents of Israel. Such a policy might have the added benefit of reducing such violent attacks as rockets shot randomly from Gaza into communities inside Israel. Israeli airstrikes, launched against military targets in retaliation for rocket attacks, have failed to deter further attacks.
An Israeli policy of reducing the size of a possible Palestinian compensation fund in retaliation for every attack against Israeli citizens would force the Palestinians to choose between killing Israelis or receiving future compensation. How might such a policy work? Here is one simple proposal. When the next Israeli government assumes office, it would start by resetting to zero a counter of Palestinian assaults against Israelis. A possible future compensation fund would be apportioned between Gaza and the West Bank on the basis of their respective populations, with about 30% of the fund allocated to Gaza, and 70% allocated to the West Bank. Hamas would administer the compensation fund for Gaza. The Palestinian Authority would administer the fund for the West Bank.
Fines would be levied on the compensation fund for the territory from which an assault originated. In that way, we would avoid penalizing one territory for an assault perpetrated from the other territory. The size of each fine would be given as a percentage of the initial compensation fund for each territory. By stating each fine as a percentage of a compensation fund, the size of the fund remains to be determined. Israel would publish a list of various offense with their associated fines. In the simplest case, all assaults, ranging from rocket attacks to shootings, would incur a fine of 1%. This would mean that the compensation fund for a territory would be depleted after a mere 100 assaults had been perpetrated by residents of that territory.