Regarding welfare, has anyone here had a chance to take a look at the 1996
welfare reform act in the US? The cite is P.L. 104-193, and its popular
name is the Personal Responsibility and Work Reconciliation Act. I
believe it can be found on the House server (www.house.gov). I bring up
this bill because it contains some interesting ideas about how government
programs should best be run (as well as some rather harsh anti-entitlement
language): local governments should control funds, and the national
government should give wide latitude to local governments to implement
incentives to work rather than stay on welfare (AFDC). With the expansion
of local control in the UK (will this term remain accurate?) in Wales,
Scotland and Northern Ireland, does it make sense to try a similar
experiment? The basic assumption is that local governments have less
propensity to encrust and entrench bureaucracy, and are more willing to
try innovative techniques to increase work appropriate to the local
employment situation.
I don't happen to be a big fan of 104-193's entitlement-ending provisions,
because, ironically, I believe they violate 14th Amendment-based
substantive due process protections (for Reich-like "New Property") and
actually infringe on federalism too! (For a contrary view, see Pierce's
Nov 1996 Colum. L. Rev. article, lauding the end of substantive due
process and trying to hurry it along)
Andrew Straw
On Wed, 3 Jun 1998, David Chapman wrote:
> (1) THE WORK-SPREADING TAX
>
> (Details of WST in my contribution of 24/5/98 and in my paper "Reforming
> the tax and benefit system to reduce unemployment", available at:
>
> http://www.democdesignforum.demon.co.uk/unemp.nexus.html)
>
> The criticisms of WST by Gavin Cameron and Eero Carroll are I think
> adequately dealt with by Jonathan Portes, in his contribution of 28/5/98.
> But I want to point out that WST
> is not an additional tax, but is merely a change of the present income tax
> and social security tax paid by the employees, into an equivalent tax to be
> paid by the employer, along with the Employer's NIC. The incentive effect
> of this on the employer will be the same as giving him a wage subsidy of
> about 35 pounds per week per worker, in that for each extra worker he takes
> on to do a given amount of work, he will pay 35 pounds less in tax. This
> subsidy is costless, since it doesn't require any increase in the level of
> taxation. Thus (pace Gavin Cameron) WST gives us a "free lunch", by making
> use of the existing system's unemployment-reducing potential, which is
> currently just going to waste.
> .
> In comparison, Geoff Beacon's work subsidy scheme requires a 5% rise in
> VAT, to finance the provision to employers of an equal subsidy per worker
> (which might come to about 20 pounds per week). Thus it is redistributive,
> making the high-paid worse off and the low-paid better off.
>
> WST thus seems more politically acceptable, as it provides a greater
> subsidy without requiring any tax rise or increase in redistribution. If at
> some later date greater redistribution were desired, this could be provided
> under WST by increasing the % tax rate paid by the employer on wages, and
> the amount of the employer's tax exemption per worker.
>
> (2) THE WORK-RELATED BENEFIT
>
> Some contributors have mentioned the Minimum Wage as a means of helping the
> low-paid. But the Minimum Wage has the drawback that the greater the help
> it gives to some of the low-paid, the greater the number of other low-paid
> workers it puts out of work. An alternative means of helping low earners,
> which tends to REDUCE unemployment, is the "Work-Related Benefit", put
> forward in the above-mentioned paper, "Reforming the tax and benefit system
> to reduce unemployment".
>
> WRB is a new type of Earned Income Tax Credit, designed to give the lowest
> earners the greatest help which is possible without creating an
> unemployment trap or a poverty trap. A person who earns a low amount per
> hour, is given a benefit per hour of work done, let us say up to 20 hours
> per week. The lower is the hourly wage, the greater is the amount of
> benefit given per hour. If the person does more than 20 hours of work, this
> benefit is withdrawn, but at a lower rate, the lower is the hourly wage.
> With a very low hourly wage, there is no withdrawal at all, and the person
> keeps the whole of any extra earnings which they make.
>
> The following properties are claimed for WRB.
>
> *WRB enables the low-paid to obtain (from wage plus benefit) both a
> guaranteed minimum income per hour of work, and a guaranteed minimum
> income per week.
>
> *However low is the hourly wage, the person has a strong incentive to do
> the first 20 hours of work per week, and an adequate incentive to do more
> than 20 hours. and to move to a higher-paying job if it is available.
>
> *As compared with a standard Earned Income Tax Credit, the Work-Related
> Benefit allows a higher AVERAGE withdrawal rate to be used, without
> trapping the poorest into their
> poverty.
>
> *Because of this better targeting of benefit, and because of the saving due
> to its greater reduction in the number of unemployed, the Work-Related
> Benefit scheme is likely to be less expensive than a standard Earned Income
> Tax Credit (or a fortiori than a Citizens' Income system or than the
> present welfare system), and to provide a greater guaranteed minimum
> income, for any given welfare budget.
>
>
>
>
> ********************************************
> Dr David Chapman
> Email: chapman@democdesignforum.demon.co.uk
> Democracy Design Forum
> Coles House, Buxhall, Stowmarket, Suffolk IP14 3EB, UK
> Tel: +44 (0) 1449 736 223
> Fax: +44 (0) 1449 612 274
> Website: http://www.democdesignforum.demon.co.uk/index.html
>
>
>
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