home
***
CD-ROM
|
disk
|
FTP
|
other
***
search
/
Software Vault: The Sapphire Collection
/
Software Vault (Sapphire Collection) (Digital Impact).ISO
/
cdr16
/
dbate015.zip
/
DBLVALUE.TXT
< prev
next >
Wrap
Text File
|
1994-08-05
|
30KB
|
561 lines
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
IS THIS AN UNTAMPERED FILE?
This ASCII-file version of ShareDebate International
was packaged by Applied Foresight, Inc. (AFI
hereafter). Every AFI-packaged ASCII version of
ShareDebate International is distributed in either an
"-AV protected" ZIP file format or a SDN (Shareware
Distributors Network) protected SDN file.
"AV" is the authenticity verification feature provided
to registered PKZIP users, which Applied Foresight,
Inc., is. If you are using the MS-DOS PKUNZIP.EXE
program written by PKWARE Inc. and do not see the "-AV"
message after every file is unzipped AND receive the
message "Authentic files Verified! #JAA646 Applied
Foresight Inc." when you unzip this file then do not
trust it's integrity. If your version of PKUNZIP is not
the PKWARE-authored program (for instance, you are
running a non-MS-DOS version), then this message may
not be displayed. (Note: version 2.04g of PKZIP was
used to create this authentication message.)
SDN is the major distributor of Shareware and
Copyrighted Freeware and users who extract files from
an SDN file with the current version of the archive
utility ARJ, should see:
*** Valid ARJ-SECURITY envelope signature:
*** SDN International(sm) SDN#01 R#2417
This file is an SDN International(sm) Author-Direct
Distribution. It should be verified for the SDN
Security Seal by the FileTest utility available at The
SDN Project AuthorLine BBS 203-634-0370.
(Note: prior to about May, 1993, SDN used PAK to
archive its distributions and its authenticity message
differs from the above.)
Trust only genuine AFI-packaged archives ... anything
else may be just that: ANYTHING ELSE.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Privatizing Welfare By Funding It
With a Double-Value Tax Deduction:
Imagine Cutting Welfare Taxes 71 Percent Less
But Increasing Welfare Handouts Over Threefold!
by Roleigh Martin [1]
June 26, 1994
My policy making philosophy is simple: in contrast to
extremists that the ends justify the means, I contend
that the means must be justified and that the means
dictate whether the actualized ends are justifiable.
Empirically, I believe that the choice of means almost
always predetermines whether the desired ends will be
obtained. The argument today about welfare varies
between those liberals who are concerned about the need
for welfare and those conservatives who are concerned
about the actual impacts of welfare. The conservatives
to date have taken two positions that are self-
defeating: either they have argued for the abolition of
welfare and the civic good-mindedness of the community
rejects that or they have argued for restructuring
welfare with a tax-based workfare program which is
still redistributionist and hence, non-conservative. A
third position can be advanced -- one that centers
itself on the means -- how welfare is funded.
As a seated alternate to this year's Minnesota state
GOP convention, I discussed this idea with a few state
legislators who have asked for a detailed paper. I
confirmed my hunch that under the existing welfare
system, about 25 cents on the collected-tax dollar
targeted for welfare finds its way into a welfare-
recipient's hand. The balance goes to the tax
collecting system and the welfare bureaucracy. Yet
private sector welfare agencies are able to pass along
anywhere from 80-90 cents on the collected dollar to
recipients.
Imagine the following welfare system -- keep in mind it
is flexible enough to handle anticipated rare problems
-- it's flexibility will be explained afterwards.
Imagine the State Government announces that welfare
will henceforth not be tax-funded at all and instead
will be funded by a double-value state tax deduction
and private sector welfare agencies. A double-value
tax deduction (DVTD) means that if an individual
contributes one dollar to a private sector welfare
agency, he or she is able to deduct two dollars as a
charitable contribution on his or her state income tax.
Immediately an astute reader has one concern: what
about donations to non-welfare charities? To avoid
having this double-value tax deduction drain away all
charitable contributions to the existing single-value
tax deductions (i.e., a dollar given is a dollar
deducted), the tax law could require that the ratio of
DVTD dollars must be a 1:2 ratio with single-value tax
deducted dollars. That is, an individual if he or she
wanted to donate $300 to private sector welfare
agencies would have to also donate $600 to non-welfare
private sector charitable/educational agencies in order
for that $300 welfare donation to count as a double-
value tax deduction. (In the absence of the 1:2 ratio,
the contributor could still obtain a single value tax
deduction, of course.)
By "private sector welfare agencies," I am referring to
any lawfully recognized 501(c)3 charitable
organization, whether religiously involved or not,
whether locally based or nationally known. The
proposed legislation will have to somehow provide a
mechanism to distinguish those 501(c)3 charitable
organizations that are engaged in qualified welfare
operations versus those that aren't.
The State could require the following four items of
information to be collected by the private sector
welfare agencies: the social security number of the
recipient, the dollar amount received, date, and tax ID
number of the private-sector welfare agency. From the
information collected, information can be summarized
and reported in two forms: -- to the public, they will
be able to determine which private sector welfare
agencies are most efficient at getting recipients "back
on their feet" off of welfare; -- to the private-sector
welfare agencies, they will be informed if individual
recipients they are serving are also collecting money
from other welfare agencies. The private sector
charitable agencies should not have access to records
in the original database that has real SSN data for
people who are not receiving nor requesting to receive
welfare benefits from the individual agency.
The collecting of money from more than one private
sector welfare agency would be totally legal, as long
as the recipients are not lying under contract laws if
any of the private-sector welfare agencies have their
recipients sign forms stating they agree under private-
sector contract law that they have filled out their
form truthfully as a contractual condition for
obtaining the private welfare assistance. You see,
there is no need for state intervention in the agency
forms and procedures used -- existing contract law can
handle that. The only thing the State needs to concern
itself with are the four items of information earlier
listed -- the free market can handle the rest. You
see, some welfare agencies may be more generous than
others -- some may want to piggyback other agency's
efforts. Let the donating private-sector determine by
their voluntary contributions what agencies are worthy
of their donations.
A modified duplicate of the State's database should be
made public for private-sector scholarly analysis where
the individual Social Security numbers (SSN) are
randomly altered but in a consistent manner. For
instance, a SSN of 123-456-7890 could become ABC-ZXY-
EIMN but all occurrences of 123-456-7890 would become
the same. Yet, 123-456-7891 might (under
randomization) become HAT-BCE-MLOP. The idea is that
there is no consistent algorithm to allow one to
reverse the alteration from the alphabetized SSN to
it's original numeric SSN. [2]
In this welfare system, competition would be abundant.
Existing charitable contributions would continue under
the required ratio 1:2 tax law. But the government
only needs to spend less than one-seventeenth of what
it spends now to have welfare recipients receive the
same amount of money! That assumes several things,
first, that income taxes in the state average 8.5 cents
on the dollar. A new tax deduction reduces state
revenue from taxes collected by 8.5 percent of the
amount deducted. DVTD would reduce state revenue from
taxes collected by 17 percent of the amount deducted.
One billion dollars from taxes collected for welfare
now means $250 million to welfare recipients --
remember the other 75 percent goes to the cost of
collecting taxes and the welfare bureaucracy. Assume
that private sector welfare agencies, plus the cost of
computerizing and reporting the gathered four pieces of
information reduces the average efficiency of private
sector welfare agencies to 75 cents on the dollar level
(the existing range reported in the general press is
between 80-95 percent efficiency). To get $250 million
to welfare recipients via the DVTD method requires only
$56.7 million of "lost taxes" due to the tax deduction.
17.6 times less revenue is required!
A liberal state, such as Minnesota, could adopt this
method and allow up to five times as much money to be
given to recipients than the existing system yet still
reduce the tax burden by over 71 percent!
The table on the next page shows the mathematics
involved. In the table is a reference to "triple-value
funding" -- I'll explain that later.
The Moral Benefits
The worst thing about welfare today, as it is has been
funded since the days of President Roosevelt, is that
the money collected is through the power of the gun --
the power of the state that backs the tax law rests on
force that will be used if the taxes are refused. The
message sent by the current funding method is that the
recipients consider it a guaranteed entitlement -- a
governmental right. The children of the recipients are
being given the message that their parent (normally,
only a single parent is involved) is entitled to money
because the parent is a victim. And then the child is
taught, particularly if the child is Black or Indian
that they are still being victimized by racism. It is
only a graduated--distorted though--step of logic for
the child to wrongly infer that since the force of guns
(through Tax Law) is being used to take other people's
money for his parent, that the child has the right to
also use force to get money for his own needs,
particularly since he is told everywhere that he or she
is an underdog because of institutionalized racism.
This is speculation but does it help explain some of
our crime statistics? Now I know that this paragraph
is awful blunt and politically incorrect--but the
juvenile criminal facts bear this out. Prior to
welfare by taxation, the juvenile poor--even the
juvenile racial minorities--were very well behaved.
Check your history.
Under the DVTD Method, no such message will be sent to
the children of welfare recipients. The giving is
entirely voluntary. Not a single individual is forced
to make the donation to obtain the tax deduction. It
isn't taxes collected but state tax revenue lost by the
existence of the deduction. Recipients will know and so
will their children that the money they receive is
through the generosity and love of their fellow
citizens. People do not make money or save money
through tax deductions. If I donate a dollar under the
DVTD method, I reduce my state taxes by 17 cents but I
reduce my retained revenue by one dollar. Yet
Americans are very generous people. They will give to
private sector welfare agencies.
---------------------------------------------------------------------------
The Double-Value Tax Deduction Welfare Method v. Current Method*
Tax System What Percent
impact for over- welfare diff. of
Funding revenue Revenue head recipients needed
method pool** pool pct would get taxes
Current $1,000,000,000 $1,000,000,000 75.00% $250,000,000
Double-Value 56,666,667 333,333,333 25.00% 250,000,000 5.67%
Triple-Value 85,000,000 333,333,333 25.00% 250,000,000 8.50%
Tax impact What welfare
if 5 times recipients
Size of Double larger would get
Value Pool 56,666,667 283,333,333 1,250,000,000
* See data assumptions in text.
** The tax impact for the double- & triple-value deduction methods
refers to "taxes lost" due to the deduction. The cost of the state
database operations are not shown.
---------------------------------------------------------------------------
One legislator asked me what if up-state people in the
countryside do not give enough to private sector
welfare agencies? Well, some of the metro (down-state)
donations could be to state-wide private sector
agencies. Secondly, if the DVTD method is not pumping
enough money into private sector welfare agencies, the
state could make it a triple-value tax deduction. That
is, a dollar donated is a three dollar tax deduction.
The table presented above shows how even a triple-value
tax deduction reduces the impact on tax revenue 11.7
times less!
What is the difference in this moral message? If
someone voluntarily helps you out when you are down,
don't you not want to abuse the favor? Don't you want
to quickly get yourself back on your feet? Don't you
want to get yourself back well enough on your feet to
be able to pay back the favor -- if not to the person
who helped you -- then at least to other people who
become desperate as you once did? Yet, if any of you
collected public assistance -- whether food stamps,
unemployment or what not, did it make you have the
above feelings? Of course not! You felt entitled to it
-- you felt it was yours and you weren't grateful to
anyone--were you? The only thing you might have felt
grateful for was big government. That is an awful
thing in America to instill into people. Under the
DVTD method, individuals will feel grateful to the
goodness of private-sector individuals and not to big
government.
This is obviously a conservative philosophy approach to
funding welfare. I hope readers will broaden their
appreciation for this approach and read the
historically insightful book of Marvin Olasky, The
Tragedy of American Compassion (Washington, D.C.:
Regnery Gateway), 1992.
Meeting Various Obstacles
Mr. John H. Fund in the June 14th, 1994, Wall Street
Journal editorial page, in "Welfare: Putting People
First," advocates a similar approach but using a tax
credit versus a modified tax deduction. The problem
with a tax credit is that it impacts tax revenue 5.88
times as much as the DVTD method and the message sent
to recipients is no longer that of love--for giving is
no longer a voluntary financial sacrifice of the giver-
-the sacrifice is no longer there. Furthermore, Mr.
Fund's approach lacks the information feedback that
exists in the DVTD method and without that, recipients
could abuse the system through approaching multiple,
competing private-sector welfare agencies and the
underclass could conceivably grow.
Last, to pass this proposal, there will have to be more
political groups behind it than for maintaining the
existing system. If we advocate the generous approach
of reducing the impact on state tax revenue by
threefold but increasing the pass-through revenue to
recipients by fivefold, it should be easy to get
welfare recipients to vote for the change -- it's been
said that change is always resisted unless the
improvement is seen as overwhelmingly to one's benefit.
With the ratio of DVTD to normal charitable tax
deductions 1:2, or whatever it must be to gain the
support of existing charitable organizations, it will
be greatly advantageous to these private sector
organizations for they will see tremendous growth.
Conservatives, including welfare-conservative minded
Democrats, should naturally favor the DVTD method over
the current method or any tax-funded workfare approach.
That leaves the welfare bureaucrats and diehard
statists as the main opponents of DVTD. Given a good
campaign, DVTD should be easy to pass into law,
especially if it tried and succeeds at a county level
first.
DVTD can be easily tuned to fit disfavorable conditions
by adjusting either the tax deduction -- go for a
triple-value or quadruple-value tax deduction for
instance, or by adjusting the DVTD to normal tax
deduction donation ratio -- perhaps 1:2 or 1:3 or 1:4.
Because of this flexibility, target spending can be
approximately met even though this is not a central-
planning/funding setup.
The main point is that with the double-value tax
deduction method, the means are justifiable and are
most likely the best means to obtain ends that we can
justify proudly. Free market competition in charity
will rule and once again, as the generous in America
did in the 19th century, we can be seen as caring
neighbors in the community to the lesser well-off
citizens who will be helped in an environment of
freedom to choose which method (source of help) do they
want to turn to for help to get back on their feet.
Just as the well-off people have freedom of choice,
let's enable all Americans to have freedom of choice to
determine how they struggle through life -- not just
after they get back on their feet but before that.
It's time that all Americans, rich and poor, once again
treasure freedom of choice!
Questions and Answers
I submitted the initial draft of this proposal to
newsgroups on the Internet and on Compuserve. I
received very enthusiastic support for the proposal--no
opposition--but I did receive several questions for
which the answers are hard to retroactively fit into
the main text. These questions and answers follow.
Please note that the questions and attitudes in these
questions are not mine! Some of the attitudes in these
questions are harsher than my own!
Question 1: "On the whole, I like the idea. However,
I am not sure of the justification of the 1:2
requirement. Allowing for my incomplete knowledge of
relevant law, aren't all charities set up for public
service in one form or another? Should welfare
charities be singled out over, say, the Red Cross, or
the local community theater? Do Goodwill and the
Salvation Army count? How about the United Way? Where
is the line drawn on welfare vs. non-welfare charities?
I would prefer to see the double tax deduction for all
charities."
Answer 1: In the public's eye there are two types of
public services needed -- those that are so vitally a
matter of life and death that the public has decided
not to leave them to voluntary contributions such as
welfare versus those considered of a lesser urgency but
still desired for which the public allows them to have
a tax-deduction status but funding is otherwise left up
to voluntary contributions. This proposal maintains
that distinction and separates the two "camps" via the
single versus the multiple-value tax deduction (i.e.,
in case the double-value tax deduction does not raise
enough money, the concept allows a triple-value, etc.,
tax deduction to be created). As said earlier, the
enabling legislation will have to have a mechanism to
distinguish those charities engaged in welfare versus
non-welfare operations.
Question 2: "Don't give it to them, make them get out
from in front of their TV's or out of their beds and
work for their welfare. There is enough litter to be
picked up, ditches to be dug, etc."
Answer 2: The individual private sector agencies
could require work for the handout; it'd be up to the
market to decide if they want to only fund work-
requiring private sector welfare agencies.
Question 3: "My personal problem with welfare today is
I do not believe that a person who does not work should
receive more money/benefits than a person who does."
Answer 3: The private sector agencies under my plan
don't necessarily have to use the donations to give
cash handouts to welfare recipients -- it's whatever
the marketplace would determine -- it might decide to
go for private sector training/boarding schools that
provide on-the-job training/work and room/board to
welfare families. Such jobs might be quite
unattractive to non-welfare recipients but attractive
to those at the bottom of the latter. Rather than have
elitists decide, I'm in favor of the charitable
marketplace deciding. No one is forced to donate under
my proposal. You can save your own money if you want.
Question 4: "Will there be a tax reduction for
everyone since the state will no longer be paying for
welfare?"
Answer 4: There would be a reduction in state
government spending equal to the amount of the current
welfare setup. Taxes collected will be reduced the same
less the small fraction of "taxes lost" due to the tax
deduction (see the data table shown above).
Question 5: "How does the federal portion of welfare
fit into your plan?"
Answer 5: The state would apply for a waiver from
federal government and the U.S. Congressmen/Senator
from the State would be wise to ask for whatever money
it's entitled to to go to other projects however I'd
prefer a tax rebate to taxpayers.
Question 6: "How is the benefit amount determined?"
Answer 6: Totally left up to individual agencies and
the marketplace. Significant abuse would not be able
to happen because of the database/reporting features.
Any abuse would be made public and the marketplace
would stop donating. Normal 501(c)3 charitable laws
would be in force to prevent criminal abuse by the
private sector agencies.
Question 7: "Will the recipient ever have to go to
more places under your plan than they do today?"
Answer 7: That may or may not be the case--but if they
do, the agencies handing out benefits, work or money to
them will be told via the database reporting mechanism.
Question 8: "How does the recipient determine which
agencies they go to?"
Answer 8: The same way people make decisions about the
marketplace today--they learn from advertisements, word
of mouth, libraries, or consumer guide agencies.
Question 9: "Please explain how the different
agencies can give different benefits. If I was an
agency I would give all the money to one recipient--
myself!"
Answer 9: You'd be in violation of 501(c)3 charitable
contribution laws and quickly be in deep trouble.
Nobody would want to donate to any agency that isn't a
501(c)3 charitable agency. Each 501(c)3 agency has
information they publish that they use to attract
donations. Within the constraints of 501(c)3 laws and
marketplace feedback with the database reporting
mechanism, different agencies can do very different
things. That's the whole idea--to introduce
consumer/payor-marketplace sensitivity and competition
to welfare.
Question 10: "I personally don't agree that recipients
will get off welfare because good hearted Joe is giving
him the money rather than the government."
Answer 10: The private sector agencies are under no
obligation to give any money to such abusers--no one is
entitled to a single penny under my proposal. The
recipients could really have to prove their case. Now
some bleeding-heart do-goody agencies might be easier
to rip off--but only bleeding-heart softies would
donate to them--which is their right--it's their money.
The more astute people will be more discerning with
their money.
***
1. The author has a Master's degree in Sociology (1977)
and works in the private sector as a Knowledge
Engineer. He is also President of Applied Foresight,
Inc. of Edina, Minnesota, which publishes two
electronic magazines--ShareDebate International (edited
by the author) and Imprimis Online (edited by Ronald
Trowbridge of Hillsdale College, Michigan) --devoted to
innovation in politics appreciative of the free market
that are carried on thousands of computerized Bulletin
Boards around the world, featuring such authors as
Nobel Laureate Milton Friedman, Ben Bova, Jerry
Pournelle, William Tucker, Doug Bandow, Thomas Sowell
and over 50 other noted writers.
The author's address is 5511 Malibu Drive, Edina,
Minnesota 55436. Phone: 612-945-6529 (work hours),
612-933-3092 (home). Internet: rol@uhc.com. Compuserve
ID: 71510,1042. Fax: 612-945-6502 (at office- include
cover sheet).
2. Researchers do not need SSN data but statisticians
wants raw data so that they have control over
aggregation and disaggregation analysis; hence the need
to scramble SSNs because the SSN data is too
confidential to be made public to them. However the
private sector welfare agencies need to be informed if
their clients are getting contributions from more than
one agency (which again, if individual rules allow it,
would be okay; but it would be up to individual agency
rules--all enforced by contract law if they so wish);
hence the need for a database with the SSN data kept
intact. Thus two databases are needed.
###
