The legislation, proposed in March by a number of Knesset members, led by Yesh Atid lawmaker Elazar Stern, is aimed at stopping what initiators believe is the PA's program of funding terrorism. The draft says that in 2016, the PA paid out over NIS 1.1 billion ($303 million) in aid money to the families of the "martyrs."
"The funds transferred to terrorists are not only inciting but they encourage Arabs to carry out terror attacks," Stern told reporters.
"It's a real incentive to murder Jews, and it's our duty to stop this insanity immediately."
The bill is expected to come up for discussion during the next Knesset session in mid-May. If it is passed, the Defense Ministry would be required to report annually on how much money the PA spent on stipends to the security prisoners, so that the amount is deducted from Israel's transfer of funds.
Palestinians claim that the series of attacks in 2015 and 2016 were not driven by money but rather by despair over the half century of Israeli occupation and a desire to avenge those killed by Israeli troops or armed civilians.
The bill was reportedly inspired by the recently reintroduced Taylor Force Act, named for former US Army officer Taylor Force who was killed in a terrorist attack in Jaffa in March 2016. That bill seeks to block US funding for the PA if the controversial practice doesn't stop.