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Welfare, time limts and tax credits |
from NewsLink, Vol. 3, No. 1, Fall 1998
This December, the Commonwealth of Massachusetts will begin terminating cash assistance for nearly 6,000 families under its Transitional Aid to Families with Dependent Children (TAFDC) program. Under this program, nonexempt, able-bodied welfare recipients lose their cash benefits after receiving those benefits for two years. The same program requires able-bodied recipients to work at least 20 hours per week.
When the TAFDC clock began ticking two years ago, the state's Department of Transitional Assistance (DTA) predicted that 41,039 families would be affected. Because of an expanding economy, rising wages, workfare rules and a tight labor market, that number has decreased to 5,885.
Such results were made possible, in part, by increased spending on child care and on employment services by the Commonwealth. Spending on day care for welfare reform more than doubled between fiscal years 1992 and 1998. But, as expected, the decline in caseloads has resulted in reduced TAFDC spending.
One criticism of TAFDC centers on the hardships faced by families being forced off the rolls in December. According to this criticism, the state should postpone the deadline or broaden the eligibility for obtaining exemptions.
Another criticism centers on the workfare requirement. Critics have argued for permitting welfare recipients to substitute job training and education for work.
Supporters of the law argue that the program is a success as originally designed and that any relaxation now would slow the transition of welfare recipients into the workplace. We believe, however, that both critics and supporters are missing an opportunity to blend responsibility and compassion.
The challenge for policymakers in Massachusetts isn't just to determine when to cut off benefits or whether education is an appropriate substitute for work as a prod to ending dependency. The challenge is to design a welfare system that gives both taxpayers and welfare recipients increased control over the allocation of welfare moneys.
A key element in Massachusetts is already in place: the nonprofit sector. Data suggest that voters trust private charities more than they trust government to deliver services. A BHI poll this year showed that 59% of all taxpayers surveyed would increase their giving to help the poor if government were to cut back on welfare spending.
However, Massachusetts lacks tax incentives that could encourage donations to private organizations that help the poor. There is no state income tax deduction or credit for charitable contributions. This limits the funds on which charities can draw for the purpose of helping the poor.
It is not surprising, therefore, to learn that Massachusetts taxpayers are notoriously stingy. This October, the Chronicle of Philanthropy ranked Massachusetts 43rd among states in terms of per-capita giving. One reason for this dismal showing may be the lack of any state tax incentives to give to charity. Another may be that people in Massachusetts think that government will care for the poor.
The significance of this state of affairs lies in the arguable superiority of private charities over government in ending poverty. James Q. Wilson, the distinguished UCLA political scientist, points out that “private organizations do better than most government agencies at insisting on outcomes.”
Sufficiently generous state tax incentives would permit nonprofit organizations eventually to assume most of the functions of state welfare departments. We have argued for tax credits that would permit taxpayers to reduce their state tax bills by all or part of their contributions to charities that help the poor.
Private charities, thus fueled by increased donations, would have the resources to help the poor. They would have the freedom to demand such accountability from recipients as they deemed appropriate. Donors could determine which nonprofit organizations were more effective in ending poverty. And the poor themselves would have a choice of charities to which they could go for assistance.
Why charitable tax credits?Consider the problems faced by the poor in trying to find employment. A low-income single parent with school children has to worry not only about day care but also about what to do when food stamps run out or when the oil burner becomes empty. Moreover, since most of the new jobs are being created outside of the city, transportation is a major problem. Getting to work and trying to secure the job skills necessary for better employment is difficult.
Private charities are well suited to address problems such as these. A private charity could offer transportation, the use of a car or even car repair assistance to a client needing transportation. Private charities can tailor their methods and their services to the needs and resources of their individual clients.
Whether government can continue to assume care for the poor with its one-size-fits-all approach will be tested in the coming months when the fate of the nearly 6,000 families will be determined. If these families do not find work, the Massachusetts poverty rate, already on the upswing, will get worse.
Rather than debating the merits of Chapter 5, the Commonwealth's welfare reform law, Massachusetts should offer tax incentives that would allow citizens to “test-drive” their altruism on the nearly 6,000 households who will need to turn elsewhere than government for help. in which we do live offers the opportunity, if not the guarantee, of further robust growth.st of all possible worlds, but the world in which we do live offers the opportunity,
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NewsLink is the quarterly newsletter of the Beacon Hill Institute for Public Policy Research at Suffolk University. © 1996-2002. All rights reserved. Posted on 11/20/98.
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