RAMALLAH, West Bank—A standoff over Israel’s withholding of tax payments to the Palestinian Authority has drawn mounting complaints of hardship in the West Bank, where civil servants have seen their salaries slashed and some teachers don’t have enough cash to commute to work, according to officials.

Abdel Rahman Bayatneh, spokesman for Palestinian Authority’s Finance Ministry, said some hospitals in the West Bank are running short of medicine in the growing financial crisis over Israel’s refusal for three months to pay more...