September 2005
Here’s my pitch:
Employers frequently withhold more than taxes from paychecks. For instance, when I worked at Starbucks, I could choose to have a few bucks a month taken out post-tax to help other Starbucks employees with financial crises. Right now, I get a pre-tax withholding for transportation reimbursements, which I get back by sending them receipts of my monthly BART ticket purchases.
But each of these withholdings is limited to a single non-profit domain: health, transportation, whatever. And most of them are self-centered — your health savings account just goes to you. In the case of Starbucks, the crisis account only helped Starbucks employees. If you want to contribute your wages to fighting poverty, or to defending civil liberties, saving the environment, building museums, focusing on the family or whatever, you gotta do it yourself.
The best way to do this, right now, is to set aside X dollars a month, keep track of how much you donate, and try to acheive as much parity between the two amounts as possible. This would be much easier if you actually had a seperate bank account that held your charity money, but that’s hard to do. It’s possible to keep track of these things with Quicken or some such, but no one I know has the zeal for accounting that makes this a worthwhile undertaking. So we make willy-nilly donations whenever a worthwhile cause floats into our awareness, and hopefully the sum of those donations adds up to the holistic amount we feel we should be giving, but probably not.
So, what if there were a way to withhold X percent of your wages, pre-tax, and put it in an account that you can use as a fund for donating to various non-profits? Let’s call them “giving accounts”. Rich people do this by creating their own foundations. Why not democratize it by making those kinds of facilities available to Wal-Mart employees, Starbucks baristas, schoolteachers and other mere monetary mortals?
As far as I can tell, this would work out the same, tax-wise, as donating whenever you feel the urge. Under the current system, you get an income deduction letter when you donate to a nonprofit. With a giving account, you don’t get the income and you don’t pay the tax. Same thing.
I initially thought that you’d need to pass a law in order to make this pre-tax exemption kosher with the IRS. Preliminary conversations indicate that this is not true — employers can take out money from paychecks pre- or post-tax, as long as the taxes square up in the end (or something). That’s good.
Then we’d need to set up organizations to administer such accounts. With the right regulations in place to prevent malfeasance, account administration could probably be done by an organization that is itself a non-profit. It would be a large enterprise, but hopefully most of it could be web-based. The challenge would lie in convincing employers to make these accounts available to their employees. In many ways, that’s just as difficult as getting a law passed. I imagine the best place to start marketing something like this would be in non-profits themselves. Companies like TIAA-CREF handle benefits for non-profits already. Giving accounts may be a natural extension of the services they already provide to employers.
So I imagine that when a new Starbucks employee becomes eligible for benefits, they set up a giving account and fill out the requisite paperwork for it in the same packet as the paperwork for their health care, their stock options and so forth. They get a username and a password which lets them log into their account and quickly make donations to 501c(3) organizations of their choice, or to set up automatic weekly/monthly/whatever donations. They get quarterly statements, and a yearly summary they can use for their taxes, instead of having a thousand donation reciepts they have to keep track of.
We’d also need to make sure that those giving-accounts organizations, and the companies that use them, are legally prohibited from restricting the range of organizations employees can choose to donate to. This would be subject to heated debate, but those prohibitions need to be in place to stay true to the spirit of giving accounts.
All this would be a good idea because:
1. It makes thinking about donations much easier. You set aside a certain percent of your income for charity, and from that pool you can choose to make monthly donations to various places. Just like it’s nice to have a different account for saving money for long-term me-stuff, it would be nice to have a seperate account for not-me stuff.
2. Psychologically, I think people would donate more if all their giving was taken out of their paycheck before they deposited it. I like the idea of people answering the question, “How much of your income do you want to give to charity?” rather than the question “How much, if any, do you want to give to specific cause X? How about specific cause Y? Cause Z?”.
3. It creates a social institution of charity, sort of, that doesn’t place value on donations to any specific organization, but instead appeals to the abstract idea of charity itself.
On the other hand, giving accounts would seem to be a bad idea because they are formed from the same conceptual DNA that gives us so many “starve the beast” market solutions to society’s greater ills. And yet I wouldn’t be too worried about it.
So, two questions for anyone who stumbles upon this post:
1. Do you know of anything like this already?
2. Would you participate in something like this?
Also: Yarr, matey.
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I was discussing the patent system with a right-wing penpal. At one point, he questioned the necessity of patents and copyrights and, because I believe that a properly-moderated patent/copyright system is a good healthy thing, I wondered how I ended up to the right of him on this issue. But…is it more conservative to believe there should be a patent system, or to believe ideas should multiply as freely as the ‘free market’ will let them?
Why does the patent system exist? To correct a deficiency in the free market. It turns out that people need incentives to create ideas and art just like they need incentives to create guns and butter. But once an idea has been thought up, it is not a scarce resource. You can’t control its distribution unless you keep it all to yourself. The free market doesn’t care about your idea–it only cares about how well you can turn it into something scarce (and therefore sellable). Your invention is worth nothing unless you can actually produce it–and produce it faster and cheaper than your competitors, who have free access to your idea because you can’t lock it up.
In this system, would-be inventors throw up their hands. “I’m a smart guy. I came up with a great idea that deserves to make me a lot of money. You’re telling me that’s not enough? You’re saying I need to be an expert businessman in addition to an expert engineer if I’m to profit off my skills? Forget you.” And innovation stagnates.
The patent system is a human construction, run by the government, which corrects this deficiency. Everyone is glad it exists, and even critics of its current structure don’t think it should be abolished. And yet, patents and copyrights constrain the things someone can naturally do with someone else’s ideas. Right now, there’s a market for cartoons. Anyone is free to make a cartoon, because the techniques for making cartoons are in the public domain. However, every cartoon has to be different. Steven Hillenberg owns SpongeBob Squarepants, so I can’t use SpongeBob in my cartoons any more than Steven Hillenberg can use my toaster when I’m not around. If no one owned SpongeBob, there would be a whole other competitive, innovative market of SpongeBob cartoons. Same goes for Beatles remixes, or fan-made Star Wars movies. No one would have incentive to create those new works, but if those works were somehow created, everyone could improve on them . That’s the way things are in a free market.
Thinking about this has led me to make a distinction between free markets and capitalism. The free market is that entropic, Darwinian system in which anything goes. The amoral laws of supply and demand are the only laws in a free market.
Capitalism is another thing altogether: it puts a controlling framework around a free market to guide its energies toward innovation and societal progress. Capitalist markets have to be constructed on top of free markets, but they are constructed. Capitalism could be conceptualized as the art of constructing market and government policies that foster as much innovation as possible, given the laws of the free market. But capitalism is not the same as the free market. Capitalism’s cool, the free market sucks.
It’s the difference between evolution and animal husbandry. Evolution is a natural system that works well for creating a planet teeming with diverse life. It’s not so good at giving those various life forms the traits that are the most useful for people. For instance, sheep are great, but if their wool were fluffier, that would be better for humans. By intentionally mating their fluffiest livestock, farmers harness the forces of evolution and genetics. They put energy into the system and rules onto the chaos to eliminate inconvenient properties of evolution — whereby it takes millions of years, and trial and error on a cosmic scale, and you might end up with sheep that are fluffy but carniverous.
Of course, capitalism goes awry when it’s structured in a way that commoditizes things too much and stifles innovation. Our current system of de facto indefinite copyrights is such a system, because ideas are treated too much like real objects. My toaster will always be mine unless I say otherwise. Should the plays I write have that property? Disney never has to relinquish the rights to Mickey Mouse, so has no incentive to innovate its Mickey Mouse cartoons or create new cartoon characters.
When we agree that the “benevolent free market” is a distraction, and that any market worth fighting for necessarily structures the range of economic options with some moral end in mind, then we can have productive conversations about those glitchy commodities where the free market laws clash with human endeavors: drugs, algorithms, cartoon characters, etc.
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