Monday, July 08, 2019

Charity Vouchers: Decentralizing Public Spending

People sometimes object to the charitable tax deduction on grounds that it is "undemocratic", incentivizing wealthy individuals to exert philanthropic influence instead of filling the public purse. On the other hand, well-targeted philanthropy surely achieves more good than paying extra to the government (which may just go to paying down the public debt, funding unnecessary wars, military parades for the Great Patriotic Leader, corporate welfare, and tax breaks for the wealthy).  If choosing where best to donate your money, "the US government" would seem an unlikely answer.  We recognize that charities could use extra funds more effectively. So it seems worth exploring ways to boost the philanthropic sector whilst avoiding the potential downside of concentrating power in the hands of the ultra-wealthy. The obvious solution: charity vouchers.

Charity vouchers would be a bit like basic income, but only usable for donations to eligible charitable organizations. Every citizen would receive charity vouchers (e.g. $1000 per month), to decentralize public spending and social responsibility.  To overcome collective action problems and benefit from economies of scale, individuals could choose to transfer their vouchers to a trusted 'meta' organization (like GiveWell) to disburse on their behalf.

Like basic income, charity vouchers nicely separate the issues of "redistribution" and "size of government". They're the sort of thing that small-government "compassionate conservatives", if any still exist in this age of Trump, clearly ought to support.  The democratic left should like the redistribution of influence, empowering ordinary citizens to shape public spending, thereby making use of the local knowledge and values of diverse communities.  Market liberals will laud the efficiency gains of making trade-offs transparent: money spent on one cause is not available for another, and making this more salient may help to reduce wasteful spending that sounds nice in isolation but clearly isn't worth the opportunity costs.  Moderates may appreciate depoliticizing control of the public purse, reducing the stakes of political contests, and reducing the power of (increasingly dysfunctional) political parties.

There are tricky questions of implementation to consider. (1) How generous should the vouchers be?  (2) What current spending would these replace?  Or, to shift the implicit baseline, what things should government directly fund independently of citizen-supported funding?  (3) Should citizens be able to direct their vouchers to specific government departments, e.g. the military, or education, or social security, rather than choosing between NGOs or the government as a whole? (4) How restrictive should the eligibility criteria be for charities?  Do we want to allow any non-profit to qualify, or must they provide credible evidence of achieving humanitarian goals?  (5) How could we best prevent self-dealing? (6) Should everyone's donation choices be made public? Or just aggregate data?  (7) Should there be any regulations or restrictions on how (and how much) eligible charities may advertise to the public?

Let me know what other key questions you can think of.

Also, what do you think would be the likely consequences of implementing charity vouchers (in whichever way you think best)?  I suspect major beneficiaries would include children, cute animals, and the global poor (relative to current public spending).  Churches too, if they were eligible, though they arguably shouldn't be.  Spending on the elderly would likely be reduced from current levels.  Total social spending may increase, as public support for citizen-driven philanthropy may well be higher than public support for government-chosen priorities. If so, this strikes me as an overall positive prospect (though the 'cuteness' bias in animal welfare is unfortunate).

All thoughts / comments / objections welcome.

UPDATE: I hear that Rob Reich proposes a similar idea, of 'civil society stakeholding grants', in his book Just Giving.  Very cool!


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