Wednesday, October 12, 2011

About food stamps and millionaires

At National Review today, Robert Verbruggen urges the federal government to save (admittedly minimal) money by tightening standards for the food stamp program. Spending on the program, he says, has quadrupled during the last 10 years and standards are too loose:
This has created some truly ridiculous situations — such as the case of a Michigan man who won $2 million in the lottery, tied it up in investments, and received so little income from them that he was still eligible for food stamps. Until a recent policy change, food-stamp eligibility in the state was based solely on income, with no consideration of savings accounts, investments, or other assets. Though the policy was set at the state level, federal taxpayers picked up the tab.
But how many millionaires are gaming the system to get food stamps? I'm guessing maybe ... this guy. Maybe there are a few others out there. But I'll pull a number out of my posterior and guess that 99.99 percent of all food stamp recipients are not millionaires. And I defy anyone to prove otherwise.

This is in keeping with standard conservative rhetoric—going back to the time of Ronald Reagan's legendary "welfare queen"—that the people who receive safety benefits are somehow secretly well-off people who don't need the government largess. (It's only been a couple of months since National Review tried the same tack against a school-lunch program in Detroit.) That seems unlikely to be as effective an argument as it once was: Formerly middle-class suburbanites are a huge portion of the new food-stamp recipients. But the policies conservatives advocate aren't really designed to keep millionaires from getting food stamps—they're designed to keep poor people from getting food stamps.

Here's how you can tell: Verbruggen's example—a millionaire escapes his responsibilities because he receives his income not as "income" but as interest on investments—is also the fundamental scenario underlying President Obama's advocacy of the "Buffet rule." Some millionaires actually do pay lower tax rates, overall, than most middle-class folks because they receive most of their living money from capital gains, which are taxed at a much lower rate than ordinary income. Yet I doubt very much that Verbruggen would advocate increasing the tax rate on capital gains because of this situation.

Take a guess: Are millionaires more likely to avoid paying higher tax rates because of investment income, or more likely to use that income as a loophole to apply for food stamps? And which activity has a greater social impact?

This is one reason there is an Occupy Wall Street movement: Conservatives will defend millionaires from paying the same tax rates on investment income that you do on your work income—but they'll use that same investment income as a justification for undermining the safety net for the poor. It's almost as if Republicans were the party of the rich.

1 comment:

James Drake said...

How to put this? I have a job that amply provides a comfortable for my household. When I shop I see that foods that we would consider luxuries are eligible for purchase with food stamps.

Why is that?

Also note that even sit-coms like Everybody Hates Chris have taken up the black market in food stamps.

IMHO there's a lot more potential for gaming food stamps than you suggest.