Are the Rich Necessary?

A Fourth Way?

If we were really serious about ending poverty in America, what would we do?

Rely solely on economic growth? On government programs? On a mix of private and public, the so-called Third Way? Let's consider a Fourth Way.

We hear a lot about social entrepreneurship. This means running a non-profit more like a business. Social entrepreneurs are making a big difference, but they still lack capital.

Non-profits today represent only a small sliver of the economy. We could change this by making charitable giving more affordable.

At present, when you donate to charity, you take a tax deduction. If you are in the 25% tax bracket, government will reimburse 25% of the value of the gift. Most of it still comes out of your pocket.

Let's have charitable tax credits as well. With tax credits, you could take a charitable gift off your taxes dollar for dollar. You would have a simple choice. Pay it to government or give it to charity. This could produce a torrent of cash for charities.

At first this might apply only to charities working directly on the ground to help the poor. In the long run, government might outsource all its social programs to a much larger non-profit sector.

The charitable tax credit approach could help new business entrepreneurs too. They could donate shares to charity in lieu of taxes. This would leave more cash to grow their business faster and create more jobs.

Charitable tax credits would also make sense for estate taxes. Estates represent a lifetime of saving. And we need savings in America today. By using tax credits, we could steer more estates into charitable endowments. That would protect the savings.

The American political argument is usually framed in terms of having more or less government. Let's try something new. Let's expand the non-profit sector and bring more hope and help to those who need it.

—Hunter Lewis