So here's an idea: why not reduce income tax drastically and let taxpayers either opt in to paying their current rate of tax, or choose to give a decent proportion of their income to charities or individuals whom they (and the government) think are deserving?
Ask yourself," wrote John Fund of the Wall Street Journal a decade ago, "If you had a financial windfall and wanted to help the poor, would you even think about giving time or a check to the government?"Those who don't opt in to paying the higher rate of income tax would be highly motivated to ensure that their contributions to good causes were spent wisely. This could be a big improvement over the current system because governments cannot or do not discriminate between those who are genuinely poor and really do need a helping hand, and those who would actually benefit by being coerced into finding a job. This scheme could (initially) be restricted to donations to charities, who could expect to see large increases in their funding. There would be inefficiencies of course, and some ripoffs, but in comparison with the current system, whereby taxpayers fund people they do not know and with whom, increasingly, they cannot identify, is breeding cynicism and resentment.
More and more groups could be brought into the realm of registered charities, including those that supply public goods such as environmental benefits, and who are often more efficient and highly motivated than government bodies.
The benefits of this 'give to charity directly' scheme are:
- Taxpayers would be empowered and take more interest in their contributions;
- The deserving poor would most likely receive more benefits;
- Those currently on benefits who don't need really them would be coerced into finding work, and would probably also benefit in the long run by doing so;
- The supply of public goods, including the relief of poverty and the cleaning up the environment would become much more efficient, because charities and other groups dependent on direct public contributions are much more highly motivated than government employees; and
- The supply of these public goods would more closely cohere with the public's wishes than when, as now, it is mediated by a large and remote bureaucracy.