It doesn't really work to take a small group of nuts and extrapolate what they say to some national policy. If the small group of nuts are in power in your federal government, then it's a different issue.
Where did anyone say this was national policy? Because if someone did, they are right. To quote Haaretz
The most prominent example of a country that refused to allow Jews to marry non-Jews was Germany, when it enacted the Nuremberg Laws. While Israel makes sure it doesn't disengage entirely from the rest of the world by recognizing marriages outside its borders, marriages between Jews and non-Jews here are forbidden. Now, in an effort to address the "problem" of those who immigrated to Israel under the Law of Return but are refused status as Jews by the state, these people will have the option of entering a state-sanctioned covenant with their spouse, but only if the spouse is also classified as a non-Jew.
Racism is rife in Israel. For example, , another report
Among Jewish respondents, 55 percent support the idea that the state should encourage Arab emigration from Israel and 78 percent oppose the inclusion of Arab political parties in the government. According to a Haifa University study, 74 percent of Jewish youths in Israel think that Arabs are "unclean."
(I think that identifying someone as unclean based on ethnicity qualifies as "racism" and 74% as "rife").
About a fifth of Israel's population is made-up of Arabs and, on average, their families have been there far longer than those of the non-Arabs (mostly Russian, European, North African and Middle-Eastern Jews).
Or here is another article
, concerning education:
The document, penned by the Association of Civil Rights in Israel and the Ir Amim non-profit organization, indicates that the eastern part of the city lacks some 1,000 classrooms, and that half the classrooms and preschool facilities there do not meet health and security standards.
Moreover, over 5,000 school-age students in East Jerusalem are not registered for school.
"You can see some of these children lifting cases in Mahane Yehuda market, and some others sell cigarette lighters at intersections," said Meretz city council member Meir Margalit.
"There is a law for mandatory education - the state cannot sit quietly when thousands of students are unaccounted for," he added.
The report states that 30,000 other students are forced to seek private education due to a lack of public schools.
Figures obtained by Haaretz show a deep discrepancy between the education systems' budgets in East and West Jerusalem.
Last year, NIS 577 was spent on each primary school student in the predominantly-Arab eastern section of the city, compared with NIS 2,372 for a student in the mainly-Jewish western part. In preschools, spending per student in West Jerusalem was 2.7 times that of East Jerusalem, and in special education 2.5 times.
Sources at the Jerusalem municipality said recently that the city is seeking to close those gaps.
Sadly, the nuts are in power. I'm surprised you assumed otherwise. Is it unexpected that a Jewish State creates laws that treat people differently based on whether or not they are Jewish? I would expect the same from a Christian State or a Muslim State.