The Washington Post has a lengthy article discussing the new focus of congressman Paul Ryan on fighting poverty. Since this is a report on something that Ryan is supposedly going to do in six months to a year from now, I have to assume that it is not actually news so much as it is speculation. Nevertheless, it would be both highly significant and a great development if someone as focused, knowledgeable and intelligent as Ryan were to develop a conservative program to fight poverty.
Right now, most of the anti-poverty programs in America are handouts. Millions of Americans get payments of one sort or another from the government which allow these people to live either in poverty or on the edge of poverty. Were the payments to end or to be reduced, these people would be plunged into chaos and despair. The problem, however, is that even while these programs continue, the people receiving benefits remain in a terrible situation waiting for the next payment with little hope of advancement to a better life. The liberal welfare state is, in many respects, a life sentence for those receiving help; they are stuck with enough to survive but no meaningful way out.
A true conservative anti-poverty plan would work to allow individuals now in poverty to actually get out of the trap. The goal is to bring millions of folks from poverty or near-poverty to middle income status or even higher. Not only will this rescue these folks, but it will allow them to be the engine to help still more escape from poverty.
Because this is such an important effort, I am going to write periodically about possible methods to end poverty using a conservative approach.
I will start today with a suggested minor change to the tax code that would likely help thousands, if not millions. It is a change to a provision that most people have never even considered. Right now, if a person puts money into a new business venture and that new company fails, the resulting loss can only get written off at a rate of $3000 per year. The limit of $3000 was set 37 years ago during the Ford administration and has remained unchanged ever since despite enormous inflation. My suggestion is to increase the maximum to $20,000 per year for losses resulting from new business ventures.
This may not sound like much, but the impact it would have would be substantial. Most people know that the biggest engine for generating jobs in this country is small business. Small business stays vibrant and grows mostly by means of the creation of new ventures. So imagine, if you would, what it would mean to see an additional 200,000 businesses begun each year. Would that be half a million more jobs in the economy or 2 million more? No one could say for certain, but we know that these businesses would surely help at least a quarter of a million people out of poverty, and perhaps many more.
Anyone who wants to start a business needs capital. That cash provides funds to buy inventory to sell, to rent space from which to operate, to pay for the costs of forming the business, to get the machinery needed to operate, and the like. Some businesses are created by people who already have this capital. Other, however, only come into being if an investor or investors with cash can be found. It is this category of start up business where the proposed change would make the difference. A person with $30,000 to invest knows that money put into a new business could easily be lost. Right now, that loss would only be deductible on a tax return at the rate of $3000 for ten years. If that were changed so that the deduction of the loss would be completed in two rather than ten years, the investor would be much more likely to make the investment.
This change to the tax loss is actually a form of government subsidy for the creation of new small businesses. This subsidy, however, is totally different from the current entitlement payments. This subsidy would help individuals create more jobs, jobs that would take some of those in poverty and move them into the middle income group.
Right now, most of the anti-poverty programs in America are handouts. Millions of Americans get payments of one sort or another from the government which allow these people to live either in poverty or on the edge of poverty. Were the payments to end or to be reduced, these people would be plunged into chaos and despair. The problem, however, is that even while these programs continue, the people receiving benefits remain in a terrible situation waiting for the next payment with little hope of advancement to a better life. The liberal welfare state is, in many respects, a life sentence for those receiving help; they are stuck with enough to survive but no meaningful way out.
A true conservative anti-poverty plan would work to allow individuals now in poverty to actually get out of the trap. The goal is to bring millions of folks from poverty or near-poverty to middle income status or even higher. Not only will this rescue these folks, but it will allow them to be the engine to help still more escape from poverty.
Because this is such an important effort, I am going to write periodically about possible methods to end poverty using a conservative approach.
I will start today with a suggested minor change to the tax code that would likely help thousands, if not millions. It is a change to a provision that most people have never even considered. Right now, if a person puts money into a new business venture and that new company fails, the resulting loss can only get written off at a rate of $3000 per year. The limit of $3000 was set 37 years ago during the Ford administration and has remained unchanged ever since despite enormous inflation. My suggestion is to increase the maximum to $20,000 per year for losses resulting from new business ventures.
This may not sound like much, but the impact it would have would be substantial. Most people know that the biggest engine for generating jobs in this country is small business. Small business stays vibrant and grows mostly by means of the creation of new ventures. So imagine, if you would, what it would mean to see an additional 200,000 businesses begun each year. Would that be half a million more jobs in the economy or 2 million more? No one could say for certain, but we know that these businesses would surely help at least a quarter of a million people out of poverty, and perhaps many more.
Anyone who wants to start a business needs capital. That cash provides funds to buy inventory to sell, to rent space from which to operate, to pay for the costs of forming the business, to get the machinery needed to operate, and the like. Some businesses are created by people who already have this capital. Other, however, only come into being if an investor or investors with cash can be found. It is this category of start up business where the proposed change would make the difference. A person with $30,000 to invest knows that money put into a new business could easily be lost. Right now, that loss would only be deductible on a tax return at the rate of $3000 for ten years. If that were changed so that the deduction of the loss would be completed in two rather than ten years, the investor would be much more likely to make the investment.
This change to the tax loss is actually a form of government subsidy for the creation of new small businesses. This subsidy, however, is totally different from the current entitlement payments. This subsidy would help individuals create more jobs, jobs that would take some of those in poverty and move them into the middle income group.
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