A New Solution for Helping the Poor

Commentary by Pete du Pont

Washington, D.C., subsidizes its public housing projects at an average rate of $14,000 per household per year. But even with this generous subsidy, the vacancy rate is between 15 and 21 percent, and tenants have a 60 percent rent delinquency rate.

By contrast, Jubilee Housing in Washington D.C., a private-sector housing program for low-income families and individuals, charges approximately 38 percent of the market rate for its apartments, and provides a charitable subsidy of only $1,000 per household per year. But Jubilee's vacancy rate is about 1 percent, and only 16 percent of Jubilee's residents fail to pay rent.

What seems clear from this example and thousands of others like it from around the country is that when it comes to providing for the needs of the poor, many private charity organizations do a lot with very little money. For example:

In 1995, a private-sector charity known as the Dallas Life Foundation - which runs the largest emergency shelter in Dallas but takes no government funds - provided more than 300,000 meals (with an average food cost of just over $1.00 per meal), 109,000 occupied beds, 139,000 articles of clothing and provided low-income families with groceries on 1,040 occasions, all on a budget of about $1.1 million.
The Milwaukee Rescue Mission, established in 1893, provided basketball for inner-city youth at no cost to the public, years before the federal government discovered the idea and funded it in a "crime" bill.
The Salvation Army helped 28 million people in 1995 on a budget of $1.4 billion, or about $50 per person helped; and of every dollar spent by the Salvation Army, 89 cents goes to charitable services.
By contrast, government welfare programs, such as Aid to Families with Dependent Children (AFDC), do very little with a lot of money. How much money? According to the Congressional Research Service, the government has spent about $5.4 trillion (in constant dollars) on federal means-tested programs since 1960. Yet the poverty rate is higher today than it was in 1965, when the War on Poverty was started.

Currently we are spending almost $400 billion (about two-thirds of it in federal dollars) on federal antipoverty programs each year. Take out Medicaid and the total is about $240 billion - an amount equal to about $6,100 per poor person, or $24,400 for a family of four.

Are we getting our money's worth? Given the opportunity, wouldn't you rather see your welfare-designated tax dollars go to private-sector organizations such as those mentioned above rather than government-run programs over which taxpayers have little oversight or control? Well, that's the idea behind a proposal known as Taxpayer Choice.

Under this proposal, individuals would receive a tax credit - that is, a direct subtraction from the amount they owe the government - for the money they donate to a private charity providing services to the poor. In this way, individual taxpayers, rather than politicians, would decide how their share of the welfare bill would be spent. As a result, private charities - including those sponsored by religious groups - would compete on an equal footing with government welfare programs for the federal dollars allocated to poverty programs.

To keep this proposal "revenue neutral" - which means the federal government wouldn't lose any money - all charity allocations would be deducted from the federal government's poverty budget. In other words, for each tax dollar allocated to private- sector charity, public welfare programs would be reduced by a dollar.

Variations of this proposal - with some proposing a $500 per person tax credit, others a $100 per person tax credit and some a 10 percent tax credit - have been introduced in Congress by Senator Dan Coats (R-IN) and House Budget Committee Chairman John Kasich (R-OH), as well as Congressmen Joe Knollenberg (R-MI) and Jim Kolbe (R-AZ), James Talent (R-MO) and others.

As former presidential candidate Bob Dole said on the campaign trail: "It would present Americans with a stark choice: Give your money to the Department of Housing and Urban Development or give it to Habitat for Humanity. Give it to the Department of Health and Human Services or to Mother Teresa and the Sisters of Charity; to Big Government or to Big Brothers and Big Sisters."

With the charity tax credit, inefficient, wasteful federal programs would lose their uncontested access to taxpayer dollars, since public and private charities would have to compete for the taxpayers' welfare dollars - just as the U.S. postal system has to compete against Fedex and UPS. That competition would make both the public and private systems more efficient, leaving taxpayers and, best of all, the poor themselves much better off.