Fraud in the food stamp program is already a huge problem that costs federal taxpayers around $10 billion annually.
The Senate might have just made that problem worse.
A provision included in the major tax and spending bill that senators narrowly approved on Tuesday could give states a powerful incentive to make their food stamp fraud rates worse—because that’s one way to dodge funding cuts included in another part of the bill.
That special loophole appears to have been added to the bill to get Sens. Lisa Murkowski (R–Alaska) and Dan Sullivan (R–Alaska) to vote for the package. As Politico reported earlier this week, the two senators were opposed to a provision in the tax bill that would require states to cover a share of costs for the Supplemental Nutrition Assistance Program (SNAP), otherwise known as food stamps. Alaska has the highest food stamp error rate in the country—an astonishing 60 percent in 2023, though that figure dropped to 24 percent last year.
Forcing states to cover some of the cost of food stamps would be a big change for how the program operates, and one that is long overdue. “The federal government pays for 100 percent of the benefits, so state administrators have little incentive to crack down on theft,” Chris Edwards, chair of fiscal policy for the Cato Institute, and a longtime advocate of food stamp reform, tells Reason. While most states are not swindling federal taxpayers as often as Alaska does, more than $1 in every $10 spent through the food stamp program last year was paid out in error.
“The switch from paper food stamps to electronic benefits transfer (EBT) cards two decades ago created new avenues for abuse, such as card-skimming and using identity theft to apply for dozens or hundreds of cards,” says Edwards. “In addition, all the age-old rips-offs remain, such as selling one’s benefits to corrupt retailers for 50 cents on the dollar and reselling EBT-bought food for cash.”
Having the states pay for a portion of food stamp costs is a smart way to crack down on that. If state officials have to bear some burden of paying for the program, the logic goes, then they will be more aggressive about making sure SNAP benefits are going only to people to qualify for them.
At least, that was the idea. But to get Murkowski and Sullivan on board with the bill, the Senate added a sweetener: Any state with a food stamp error rate of more than 13.3 percent will be exempt from the federal-state cost-sharing measure for two years. (As HuffPost‘s Arthur Delaney explains, it’s actually a bit more complicated than that: “Instead of setting the threshold at 13.3%, the text says the exemption applies for states whose error rates exceed 20% when multiplied by 1.5.”)
Imagine that you’re administering the food stamp program in a state like Delaware, which last year had an error rate of 12.37 percent. If the Senate version of the tax bill becomes law, you’d have a pretty strong incentive to simply let that error rate rise a bit for the rest of this year, thus buying you two more years of a fully federally funded SNAP program with no mandatory state spending.
“It’s just an absurd policy,” Rep. Chip Roy (R–Texas) told Delaney. “Why would you penalize a state for having a lower error rate and encourage them to have a higher error rate?”
Whether that “absurd” provision becomes law remains to be seen. The bill that cleared the Senate on Tuesday faces some serious hurdles on its return to the House. Members of the House Freedom Caucus sent a memo to House leaders on Wednesday outlining some of their complaints with the Senate version of the tax bill—including the special carve-out for states with high rates of food stamp fraud.
“This carve-out rewards any state with SNAP payment error rates above 13% by delaying cost-share payments and will actually encourage more waste, fraud, and abuse in food stamps,” the group of lawmakers wrote in the memo first reported by Punchbowl News. They say they will oppose the bill unless changes are made.
Asking states to share the cost of the food stamp program is an essential step toward reducing fraud. It also just makes sense, particularly at a time when the federal government is running multi-trillion-dollar deficits. There’s no reason for the final version of the tax bill to exempt any states from that arrangement—and doing so in a way that rewards states for having higher error rates will create some obvious unintended consequences.
The post The Tax Bill Rewards States for Higher Rates of Food Stamp Fraud appeared first on Reason.com.
