Solution #2: Use the Tax Code to Supercharge Private Charity
A just society has a moral obligation to provide basic social safety nets that offer food, housing, medical care, education and disaster relief to “the least of these” among us. The Gospel of Matthew in fact describes how Jesus commanded it of us. But Jesus did not suggest that we outsource that obligation to Caesar.
Government as an intermediary in the provision of a social safety net brings corruption, a bloated bureaucracy, inefficiency, ineffectiveness, and virtually no flexibility or adaptability. No matter how badly it performs, it never goes away. In fact, failure in the public sector is automatically used as an excuse to ask for more money.
In contrast, private charity is far more responsive to changing needs, is generally more effective and efficient on a dollar-for-dollar basis, and must compete and continually perform in order to fundraise effectively and survive.
We can dramatically improve outcomes while reducing the government’s role in our lives by shifting who provides the social safety net from government to the private charity sector. All we have to do is institute tax credits, rather than tax deductions, for defined US safety net charities. It will redirect hundreds of billions of dollars away from government programs and towards charitable programs.
It also gives each taxpayer a choice: do I believe private charity is more efficient, or do I trust the government to re-distribute my money? We all know where the vast majority of Americans would come out on that question.
Transitional issues can be managed. The implementation could be phased in. Charities would be required to meet specific guidelines for both mission definition (food, shelter, health care, education and disaster relief for Americans below the poverty level) and financial transparency (similar to corporate SEC reporting rules) in order to have their contributions qualify for the credits.
Nonqualifying charities would still have 501(c)3 status and its donations would still be eligible for tax deductions. Religious organizations would qualify only to the extent of contributions to entities that meet the mission and transparency guidelines.
Within a reasonable time the massive capital shift will result in better outcomes for recipients and taxpayers alike. And this will make a substantial dent in our deficits very quickly. As funding flows towards charitable solutions, Congress will have to shut down the duplicative programs, and redirect what public capital is left to corners of the safety net that remain underfunded.
