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Thursday, February 28, 2019

The Green New Deal Would Be Even Worse Than Past Anti-Poverty Efforts

Taxes don’t just kill jobs, they can kill charity, too.

Image Credit: PublicDomainPictures from Pixabay

It’s not true, but if you ask Rep. Alexandria Ocasio-Cortez, D-N.Y., she’ll tell you conservatives don’t care about poor people. Ocasio-Cortez and her socialist cohorts such as Sen. Bernie Sanders, I-Vt., think any empathetic person has to support her laundry list of big government proposals—dubbed the “Green New Deal.” She’s called for nationalized healthcare, a federal jobs guarantee, and even “economic security” for those who are “unwilling to work.”

The poverty rate has remained roughly the same ever since, even with trillions more spent to continue fighting the war against poverty.

But for the poor, Ocasio-Cortez’s plan is rife with unintended consequences. The big-government platform pushed by the emerging socialist Left would do more to set the poorest Americans back, as its dysfunction extends beyond the usual dependency trap of modern welfare. Indeed, funding socialist programs this large would destroy our civil institutions and decimate private charity. After all, the roughly $93 trillion price tag on the “Green New Deal” would require unprecedented levels of taxation. Even Ocasio-Cortez’s ideal means of funding it, a 70 percent top marginal tax rate, would raise about $720 billion at most.

That’s less than one percent of her plan’s cost.

The War on Poverty Was Ineffective

To understand why this socialist approach won’t work, you must remember how miserably the government’s anti-poverty efforts have fared to date. In his 1964 State of the Union, former President Lyndon Johnson declared “war on poverty.” At the time, poverty rates hovered around an embarrassing 19 percent, so Johnson promised to devote more resources to government assistance programs and various forms of welfare. Since then, taxpayers have spent around $22 trillion to fight poverty.

What do we have to show for it?

In recent decades, increased government spending has barely moved the needle when it comes to the poverty rate. It hovered around 15 percent in the 1980s and has remained roughly the same ever since, even with trillions more spent to continue fighting the war against poverty. Considering Johnson’s promises (now echoed by Ocasio-Cortez and company) to “cure” and “prevent” poverty altogether, this decline in the poverty rate is, at best, a meager return on our investment.

Facing facts: The War on Poverty has failed the poor.

— Heritage Foundation (@Heritage) February 11, 2016

Government Welfare Crowds out Private Charity

Yet this $22 trillion comes at a cost greater than just a massive taxpayer burden and the rising national debt. The lesson is clear: Taxes don’t just kill jobs, they can kill charity, too. Private charity, which actually effectively fights poverty, decreases as tax rates skyrocket, and it’s not hard to see why. To some extent, anyone’s ability and willingness to charitably donate is limited by how much disposable income they have. Endless taxation to fund inefficient government anti-poverty programs leaves less in people’s pockets, so they’ve got less to donate.

A bevy of research confirms this. Before former President Franklin Roosevelt’s New Deal, churches and other private institutions played a much larger role in social welfare, according to a working paper from the National Bureau of Economic Research. Afterward, those huge increases in government spending crowded out large amounts of this charitable activity, particularly among churches. The lesson is clear: Taxes don’t just kill jobs, they can kill charity, too.

According to the American Legislative Exchange Council,

When all state taxes are considered, a one percentage point increase in the total tax burden is associated with a 1.16 percent drop in charitable giving per dollar of state income.

It’s true that our tax code contains a deduction for charitable giving, but it actually does far less to promote donations than you might think. When people are asked for the reason they chose to donate to charity, on average, the deduction ranks 11th. In fact, the Heritage Foundation found that abolishing the charitable deduction and switching our federal income tax system to a flat tax at a lower rate would actually increase charitable giving because it would increase personal income.

The Private Sector Beats the Government in Efficiency

It’s a shame this isn’t the case now, because private charity is often much more efficient than most notoriously bureaucratic and wasteful government anti-poverty programs. It’s almost impossible to track your taxpayer dollars and see if the government is wasting it. For example, our food stamp system isn’t exactly efficient. Roughly 15 percent of the program’s funding goes to administrative expenses. Meanwhile, at the private charity Action Against Hunger USA, almost 90 percent of funds received directly benefited the poor.

At first glance, the difference in percentages here might not look enormous, but it translates to thousands more hungry kids getting dinner at night.

Leaving more money available for private donation creates incentives for better-run charities. If a private charity were to waste money, donors can easily take their funds elsewhere. The website offers visitors a report of the efficiency and reputability of more than 5,000 charities. The IRS offers no such option, so it’s almost impossible to track your taxpayer dollars and see if the government is wasting it.

Of course, not all government programs should be abolished, and private charity can’t entirely replace the welfare state. Yet the discourse over Ocasio-Cortez and her $93 trillion “Green New Deal” proposals have largely focused on fiscal costs and how these programs would affect the government’s bottom line. The full consequences go much further: In their quest to wrangle billions more away from Americans’ wallets, big government proponents like Ocasio-Cortez are actually going to set low-income people back. If we slide further toward socialism, our civil institutions and our poor might never recover—and no matter how many liberals support it, that will never be progressive.

This article is reprinted with permission from The Washington Examiner.