[Congressional Record Volume 141, Number 19 (Tuesday, January 31, 1995)]
[Extensions of Remarks]
[Pages E232-E233]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


          INTRODUCTION OF THE COMMON SENSE WELFARE ACT OF 1995

                                 ______


                          HON. JOE KNOLLENBERG

                              of michigan

                    in the house of representatives

                       Tuesday, January 31, 1995
  Mr. KNOLLENBERG. Mr. Speaker, I rise today, along with my colleague 
Mr. Kolbe, to introduce the Common Sense Welfare Reform Act of 1995. We 
believe this legislation could revolutionize the way we deliver social 
services to the Nation's poor.
  Over the course of the last 60 years, government, whether it be 
Federal, State, or local, has assumed almost complete responsibility 
over caring for the Nation's poor. Like it or not, our welfare delivery 
system has essentially become a government monopoly. And it exhibits 
all of the worst symptoms: It is woefully expensive; it is overly 
bureaucratic; it is preoccupied with process; and it is client-
ignorant. Every year, it gobbles more of our tax dollars without any 
incentive to cut costs or streamline itself.
  The American welfare monopoly has also undercut the efforts of 
private organizations. It has made it nearly impossible for charities 
to place conditions on their aid, when prospective recipients can walk 
down to the local welfare office and pick up a government check, no 
strings attached.
  It has almost singlehandedly created what the Wall Street Journal's 
John Fund calls the I-gave-at-the-office syndrome. In fact, the portion 
of charitable giving in this country devoted to alleviating poverty has 
declined by a shocking one-third since 1960.
  So the question remains: How should we reform the welfare delivery 
system? Our bill, like many others, would consolidate dozens of 
overlapping, inefficient Federal programs and put that money into a 
State block grant. However, it also provides for a choice-in-welfare 
tax credit that would give individual citizens a voice in how this 
country fights poverty. Under our plan, every taxpaying American would 
be free to direct up to 10 percent of their Federal income taxes to a 
charitable organization in their community that is engaged in 
antipoverty efforts. Each time a taxpayer claimed this credit, the 
Federal Government would make a corresponding reduction in their 
State's block grant--thereby making it revenue neutral.
  The Federal Government already has a regulatory framework for 
overseeing nonprofit organizations, minimizing the need for additional 
bureaucracy. However, State governments often have a more active 
oversight program, so we would require that participating charities 
obtain State tax-exempt status as well.
  In addition, to ensure that tax credit contributions are reaching the 
people they're intended to serve, it would be necessary to establish 
guidelines for participating charitable organizations. For instance, 
charities would be prohibited from using the proceeds to engage in 
lobbying or litigation activities. We would also require that at least 
70 percent of a participating charity's expenses be allocated directly 
to the poor. And charities would be required to expand tax credit-
generated contributions within 1 year of receipt.
  To maintain the separation of church and state, religious 
organizations must have a subsidiary devoted to social welfare to be 
eligible. Organizations that have a religious component, but are 
primarily focused on social welfare--i.e., Salvation Army--would be 
eligible as well.
  Finally, to guard against possible fraud, taxpayers themselves would 
not be allowed to donate tax credit-funded contributions to charities 
in which they have a financial interest.
  Our funding mechanism is a revolving account within the Treasury 
Department that would hold the vast majority of the money the Federal 
Government intends to spend on poverty in the next fiscal year. Once 
Congress appropriated the money for this account, a small portion would 
be set aside to cover the cost of the tax credit, and the rest would be 
given to the States in block grant form. After April 15, any funds left 
in the tax credit set-aside would be given to States as a bonus.
  It is important to note that the tax credit/block grant funding 
mechanism will be separated at the State level. For instance, 
Michigan's total Federal grant would be determined by how many of its 
citizens gave to instate, qualified charitable organizations. This is 
to ensure that the effects of competition are always tangible.
  There are a few other provisions worth noting.
  First, we phase in the tax credit over a 5-year period to ensure that 
the transition to a public/private partnership is a gradual one. 
[[Page E233]] Second, while we place dollar caps on the credit, any 
contribution above that level would be tax deductible as it is now. 
Similarly, contributions to other nonprofits would also retain their 
present deductibility.
  In closing, we believe that if our bill was enacted, we could at once 
reduce Federal spending and micromanagement, create competition among 
aid providers, reinvigorate a charitable sector whose tremendous 
capacity has been subverted by government intrusion, and finally begin 
to attack poverty in a truly meaningful and effective way.


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