One hundred and fifty years ago, a new system of agriculture sprang up called tenant farming.
The premise sounded good. Poor farm laborers with no work to do would be given a piece of land to farm and the tools to farm it from a land-rich but cash-poor property owner. The profits from the produce of that land would be shared between the two, to their mutual benefit.
In reality, the landowners often burdened the workers with additional charges and mountains of debt. In the end, instead of enjoying the dignity of work and profit, tenant farmers found themselves trapped in an insidious new form of dependency and servitude under the crushing weight of their debt to the landowner.
Today, defenders of the welfare state risk a similar error when they argue against tax relief and welfare reform.
They make well-meaning arguments for more taxpayer-funded social programs aimed at lifting individuals out of poverty. But they fail to realize that the very weight of the expanding tax burden necessary to fund those programs keeps low-income individuals and families bogged down in their poverty.
Today, we risk trapping low-income individuals in a client-status dependency by creating a tax climate that makes the cost of leaving dependency behind so high it is impossible to attain. They remain tangled in a system that was intended to be a safety net to keep them from falling down but has instead become a snare that keeps them from rising up.
Fortunately, policy makers from conservatives like Tommy Thompson to liberals like Bill Clinton have concluded that the best way to help people in poverty is not to make dependency cozier, but rather to move toward independence by making work more rewarding.
Good Policy in Action
The best anti-poverty program ever designed is a job. In Wisconsin, our W-2 welfare reform was built on simple logic: All able-bodied adults who need taxpayer-funded assistance should be able to achieve long-term independence through work and support their families and children. To assist in reaching this goal, the taxpayers provide generous child care and healthcare benefits to sustain these individuals while they are making the transition from dependency to work.
The results have been remarkable. Wisconsin welfare caseloads dropped from over 52,000 right before W-2 began to only 10,000 today.
The caseload drop is only part of the story. A University of Wisconsin study of the program, funded by the federal government under the Clinton administration, compared results from individuals receiving benefits in 1998 as compared to one year later. Researchers found:
- Of those who enrolled in W-2, almost 70 percent were off payments only 12 months later;
- The average hourly wage of those who went to work increased from $7.30 to $8.10 in just one year;
- Not only did wages go up, but people worked more hours, so that one year later wages increased more than $2,000, and average family income (from all sources) increased from $12,100 to $14,800 a year.
Sadly, though, even as our success in reforming welfare moves more and more people from the world of dependency to the world of work, Wisconsin's high tax burden threatens to keep these individuals and families trapped in poverty.
Because of our tax burden, per capita income in the Wisconsin is well below that of our neighbors. Simply put, after government takes its cut, there is less money left in a Wisconsin worker's paycheck than in any of our neighboring states. That fact hurts every worker in Wisconsin, but it hits those just making the jump from poverty to the world of work the hardest.
This situation is economically untenable for the long term. Without change, more and more of our job creators and more and more of our best workers will simply vote with their feet and take their jobs, skills, wealth, and ideas to states with more reasonable tax climates.
But economics is only one reason why a society hoping to be both prosperous and just must look past the typical knee-jerk answers of more money and more government programs when dealing with the poor.
Unintended Consequences
Tax policy does not function in a vacuum.
When government puts a certain policy in place, there is always some response from the marketplace. When we raise taxes on workers, they have less money to spend on their needs, they have less time to spend on their families, they have less economic independence, they are less free.
When both parents in a family are forced to work merely to keep their family income from losing ground to their tax burden, our children are harmed, our families are weakened, and our society pays the price.
When we place high taxes on businesses, they pass those costs on to their consumers, once again forcing individuals to work longer and harder for less real economic freedom.
Equally insidious, though, is the impact of an oppressive tax policy on the relationships between members of society themselves.
It is one thing for well-designed government programs to supplement private initiative. It is another thing entirely to supplant individual initiative, individual compassion, or individual responsibility.
For thousands of years, societies relied on organizations of faith to educate our children, care for our poor, and shape our values. But in the middle of the last century, government elbowed faith out of the public square and attempted to fill the resulting hole in our cultural fabric with legions of bureaucrats, reams of regulations, and a torrent of taxes. In recent years, we have not only begun to understand the incapacity of government alone to solve so many of our social problems, we have also seen a dispiriting atrophy of the faith-based initiative once so instrumental in healing these ills.
Lobbyists ignore the homeless man on the capitol steps as they rush inside to ask lawmakers for more homeless program funding from the taxpayers.
Anti-poverty advocates propose ending the tax-exempt status of churches and benevolent societies so more money can be raised to fund government programs that serve families unable to make ends meet because of high taxes.
Workers who see a larger and larger chunk taken out of their paychecks in taxes rationalize away taking responsibility for their fellow man, figuring that they “gave at the office.”
In the end, the Great Commandment we teach is not “love your neighbor” but rather, “trust your government.” That is a profound shift that has the inevitable consequence of transforming our society from one centered on liberty and the “inalienable rights” – and concomitant responsibilities – of free individuals to one where those rights, responsibilities, and human dignity itself are subservient to the power of government.
Where We are Now
Occasionally, when extreme examples of callousness or apathy confront us on our TV news we stand back and wonder, “How did that happen?” All the while we fail to realize that civil society itself has become the victim of a prevailing government philosophy that has systematically demanded the substitution of state-sponsored programming for individual morality and love for one's neighbor.
In C.S. Lewis' words we “make men without chests and expect of them virtue. We laugh at honor and then are shocked to find traitors in our midst. We castrate and bid the geldings be fruitful.”
Those who argue against welfare reform and tax relief like to couch their arguments in terms of “compassion.” But it is an odd and tragic form of compassion that offers individuals a take-it-or-leave-it choice between security and freedom. Unfortunately, that is exactly the choice those advocating expansions of the welfare state and increases in the tax burden are offering. They are the modern equivalent of property owners offering tenant farmers a secure place on the land at the cost of economic and personal freedom.
True compassion springs from recognizing the inherent human worth and dignity of every individual and encouraging each individual to maximize his or her potential in a free society. Our goal should be to display that kind of compassion by working to end the cycle of dependency, reforming welfare, and reducing the tax burden so all our citizens can enjoy the maximum economic benefit from the work they do.
If we achieve these goals we can ensure that we have a properly functioning social “safety net,” one that helps those who have fallen bounce up and not one that keeps those striving to rise tied down.
