An Answer To Critics Of Mixing Faith, Charity & Tax DollarsCommentary by John C Goodman
May 14, 2001
Critics on the left and right are questioning President George W. Bush's plan to make it easier for faith-based charities to compete for federal welfare funds.
On the left, such activists as the Rev. Barry Lynn of Americans United for Separation of Church and State worry that the plan is an unconstitutional commingling of church and state. Lynn has a point. Why should my tax dollars subsidize your religion?
On the right, the Rev. Pat Robertson worries that federal money will subsidize "non-western" religious views, such as the Church of Scientology and the Unification Church. Robertson and Bush Advisor Marvin Olasky are also concerned that federal money will distort both the mission and the message of charities that become dependent on government.
Conservative critics are on solid ground when they worry about the corrupting effect of federal money. Private charities today already get more than half their money from government. For Catholic Charities the figure exceeds 60 percent. All too often these groups see themselves not as an alternative to the welfare state, but as part of it. Catholic Charities, for example, routinely urges an expansion of the federal welfare programs in testimony before Congress.
Yet despite the validity of the criticisms, it is increasingly obvious that helping people up the income ladder often requires changing attitudes. And religious belief may be highly effective toward this end.
So how can we take advantage of all the good that religious organizations have to offer without becoming mired in all the potential problems?
Fortunately there is a way. A Bush proposal that has largely been ignored would give taxpayers a tax credit for donations to charities that provide relief to low-income individuals. As currently formulated, the proposal is much too timid. The credit is limited to up to 50 percent of the first $500 ($1,000 for a couple), and can only be implemented by state governments. Nonetheless, Bush's "taxpayer choice" idea has the potential to revolutionize America's approach to welfare and poverty.
The basic idea of taxpayer choice is simple. Government would continue to force people to fund anti-poverty efforts through income taxes. However, individual taxpayers would be able to allocate some of their welfare tax dollars to qualified charities - both public and private. Private charities would compete with each other and with government programs for welfare tax dollars. Anyone could start a private charity and qualify for "tax dollar contributions," provided the charity had a social welfare purpose and satisfied certain other minimal requirements.
When taxpayers donated to a qualified charity, they would be permitted to claim a credit on their federal income tax returns. Ideally, each dollar donated would reduce a taxpayer's tax liability by one dollar. The loss of revenue from the tax credits would be offset by reductions in block grants or matching fund payments to the states in which the taxpayers reside.
All the decisions would be made by individuals, not by government. And for that reason, taxpayer choice has none of the problems left- and right-wing critics are currently complaining about. We have a long tradition of allowing individuals to deduct contributions to religious institutions. Taxpayer choice would continue that tradition, allowing taxpayers to support those organizations they believe are the most effective. There would be no tax credit for donations to churches. There would be credits for donations to relief services organized by churches. But no one would have to subsidize someone else's religious views - either directly or indirectly.
How much should each taxpayer be allowed to donate for purposes of the tax credit? If we divide total federal welfare spending by total personal income tax payments, the resulting figure is about 25 percent of federal income. So roughly speaking, about one-fourth of our income taxes pay for federal anti-poverty programs (not including Medicaid). Thus if this proposal were fully implemented, individuals could allocate up to one-fourth of their income taxes to qualified private charities, an amount equal to about $1,600 per year per household.
In time one would hope that private charities would prove more efficient and productive than government welfare. So instead of 25 percent of our incomes, we may find we can meet the needs of the poor with a much smaller fraction. The Biblical tithe is 10 percent. And taxpayer choice - which may be thought of as a compulsory tithe - may also get the job done for 10 percent.