March 16, 2015

"Like attorneys who comb through the tax code looking for loopholes to exploit for wealthy clients, clever state officials browsing through food-stamp rules..."

"... have figured out a way to game the program for their poorest citizens. The trick — called 'heat and eat' — is to give someone with no actual heating bill a token amount of home heating assistance — as little as $1 a year in some states, or a single dime a year in California. Sixteen states and Washington, D.C., use the gimmick to extract billions of dollars in extra federal food-stamp benefits that their citizens aren't really entitled to under the rules...."

Continue reading here.

34 comments:

CWJ said...

From the link -

"...is the perception that people are using it to cheat the government."

Don't they mean cheat their taxpaying fellow citizens?

tim maguire said...

That's what happens when you put activists in charge. Their priorities are just too important to be restricted by pedestrian concerns like the viability of the system as a whole.

MadisonMan said...

You have to pass the bill to find out how it can be exploited.

rehajm said...

People eligible for food stamps can get more of them if they can show that they also get assistance paying their heating bills, typically from a separate anti-poverty program: the Low Income Home Energy Assistance Program — LIHEAP in Washington jargon. But that requires a utility bill, which renters often don't get. So by giving those people token assistance, the states qualify their residents by other means. Pretty clever.

Pretty fraudulent.

cubanbob said...

Lets get rid off these programs altogether. Enough of doing people favors with taxpayers money. Several hundred thousand fired worthless drones would be a good start.

AJ Lynch said...

This is not news in deep blue places like Philadelphia which has offices throughout the city to inform its residents about govt handouts & giveaway programs they may be missing out on.

Shanna said...

My local fresh market put up a sign a few months ago that says 'it is illegal to sell snap benefits' or some such thing. Sign of the times, I guess. I think there is a fair bit of fraud in that program.

Sebastian said...

This is news?

SNAP, SSI, Medicare, Medicaid, black farm loan settlement, sugar subsidies, green energy loans, you name it: massive fraud, everywhere, all the time.

U.S. government is a rent-seeking machine.

BDNYC said...

So what's happened in the year since this article was published? Did Congress close the loophole?

HoodlumDoodlum said...

Geez, for some reason this brings up a faint memory I have about posts discussing problems with perceived exploitation of a program to provide inexpensive telephone servcie to the poor--something about Obamaphones, maybe a program the existed for a while but which greatly expanded under the current president's administration? Mightn't people have used that case as an example in a larger critique of the welfare state's problems and excesses, and related that to an ongoing presidential campaign? Nah, that doesn't sound right, probably I'm just remembering some racially-charged off base attack.

MayBee said...

My favorite part is how the same politicians try to get the voter to hate the people who pay the most in taxes.

Bobber Fleck said...

If a productive taxpayer attempts to scam the IRS the results are quite different.

Some animals are more equal than others.

SJ said...

I'm told that more than a few Hollywood millionaires are farmers.

In the sense that they tell the IRS that their primary occupation is farming, and they own large tracts of farmland which are rented out to agri-business firms.

Partly for tax write-offs, and partly to bring in money from various Federal programs designed to provide support to farmers.

I don't know if this is actually true.*

But if so, it would be another example of people twisting the tax/benefit system to their own ends.

And another argument that the Feds and States shouldn't be in the business of charity, because it generates so much incentive for non-poor citizens to game the system for personal enrichment.

----
*The best source I can find is this one, which may or may not be accurate.
http://www.alternet.org/story/154567/holy_cow!_how_senators_and_movie_stars_use_livestock_to_game_the_tax_code

I do know that famous musician Madonna purchased a farming operation...partly to enable her to provide a source of wealth to extended family without making that wealth a personal gift.

Basically, she found a way to employ family members in the farming operation so that she can pay them salary.

Pretty smart of her, in my opinion.

The Drill SGT said...

SJ said...
I'm told that more than a few Hollywood millionaires are farmers.


Ah, the origination of the Napa wine industry, was SF Doctors and Lawyers looking for tax shelters...

The Drill SGT said...

Expect the FCC, now that it has decided to regulate the internet (aka Net Neutrality) to add all those pesky fees that you now pay on your regulated phone lines to provide "Obamanet" access to the Democrat base...

Edmund said...

Basically, she found a way to employ family members in the farming operation so that she can pay them salary.

Why do you think the megarich set up foundations? They can get tax avoidance by donating the money and they create a place for family members to get a job if they need one. For darn near forever, as the board will remain in family hands. It was so abusive that Congress changed the tax laws to require foundations with big endowments to spend a minimum percentage of it each year.

Bill Gates has said that he intends his foundation to spend it's money and go out of business, not hang around for forever.

As for getting agricultural tax writeoffs, it's as much about property tax avoidance as anything. In most areas, ranch/farm land is taxed at a much lower rate. So you buy land in Montana, put a swank house on it, and let the neighbors run a few cows on it or mow it for hay and you own a ranch/farm, not a vacation home.

JSD said...

SNAP and farmers are bound in an alliance. Farming used to be its own constituency, but today there aren’t enough farmers for congress to give a shit. Without SNAP being part of the appropriation, there would be no political support from blue states for any farm subsidies.

Farm subsidies exist because of the nature of the business. It doesn’t fit neatly into the just in time economy. At planting time, nobody knows what the quality of the crop or what the market price will be six months later. Farming is gambling and the subsidies place a limit on losses. Yes, there is probably some abuse, but the system has been in place for a long time and works to stabilize necessary food commodities.

Drago said...

SJ: "I'm told that more than a few Hollywood millionaires are farmers."

Of course. The benefits for being a gentleman winemaker in CA is too good a deal to pass up assuming you have sufficient capital to get into the game.

Drago said...

The Drill Sgt: "Ah, the origination of the Napa wine industry, was SF Doctors and Lawyers looking for tax shelters..."

Correct, and, lets face it, it led to the boom not just in terms of volume in CA wine production, but also the quality of CA wines as these folks financed the development of modern tech married to old school wine making values.

If you haven't read the book or seen the movie about the seminal event in the trajectory, you should do so:Bottle Shock

Drago said...

If you get a chance, you can still "stomp grapes" at the Grgich Hills Winery (courtesy of Mike Grgich), the winemaking specialist responsible for the winning Chardonnay in Paris, 1976.

HoodlumDoodlum said...

JSD said... Yes, there is probably some abuse, but the system has been in place for a long time and works to stabilize necessary food commodities.

I encourage you (and everyone else here) to listen to this EconTalk podcast by Russ Roberts and Daniel Sumner on farm subsidies--it's about an hour but moves quickly and takes a fran and honest look at how subsidies came about, work today, and how difficult it likely will be to change them.

Roberts is fond of a "bootleggers and Baptist" framework for some regulatory capture, wherein two seemingly-opposed groups often rationally end up on the same "side" of a issue vis a vis gov. power or regulation.

Sammy Finkelman said...

Here's a new book - how to ganme Social Security:

http://www.amazon.com/Get-Whats-Yours-Secrets-Security/dp/1476772290

New York Times story about the book:

http://www.nytimes.com/2015/03/14/your-money/the-black-art-of-deciphering-social-security.html

Sigivald said...

Am I supposed to care about this more than "getting more stuff for also being on a heating assistance program" in any other context?

I personally see no fraud, and as usual "loophole" seems to mean "perfectly legal thing that the speaker dislikes because they disapprove of the specific use or outcome".

(Fraud? Well, they're getting actual assistance from the State, for real. And not lying to the State to get that assistance. And thus qualifying under the letter of the law - and the letter is all the law ever is or should be.

Wanna stop that? Great! Change the law, don't bitch about "loopholes" that anyone could have foreseen given 30 seconds of forethought.

All systems get gamed. This is neither exploitation nor wickedness, but simply how human beings always have worked and always will work.)

damikesc said...

This is part and parcel of the argument against public employee unions.

The people "in charge" don't have THEIR money in the game so they don't care. They will happily spend other people's money all day long as it improves their job prospects.

Am I supposed to care about this more than "getting more stuff for also being on a heating assistance program" in any other context?

It is OUR money, so yeah.

Wanna stop that? Great! Change the law, don't bitch about "loopholes" that anyone could have foreseen given 30 seconds of forethought.

That'd kill Progressivism dead in seconds.

Michelle Dulak Thomson said...

Granted, Sigivald; but all the same there is reasonable use of the law, and obvious misuse, and this is the latter. A check from CA to a citizen for ten cents just shouldn't have any impact on anything else.

I am wondering, incidentally, whether all of these heating supplements, however trivial, are even going to people assumed to need heat at all. There are large swathes of CA that are boiling hot in the dead of winter.

Shanna said...

Fraud? Well, they're getting actual assistance from the State, for real.

When people have way more food stamps than they can possibly use, they start gaming the system - either selling off their benefits to someone else to use, or buying products and reselling it. Which is fraud.

n.n said...

With a multi-trillion dollar welfare economy, there are still indigent, homeless, and even unidentified Americans. Someone is lying, skimming, or both.

Achilles said...

n.n said...
"With a multi-trillion dollar welfare economy, there are still indigent, homeless, and even unidentified Americans. Someone is lying, skimming, or both."

It has been pretty well documented that the majority of money spent on the "war on poverty" goes to people not in poverty. Mostly Mid level bureaucrats and community organizers.

HoodlumDoodlum said...

Sigvald said...Well, they're getting actual assistance from the State, for real. And not lying to the State to get that assistance.

I think the implication, Sigvald, is that the State is lying, not the individual recipient. I'm not sure how you square your assertion that no one is doing anything wrong/contrary to the letter of the law with the article's assertion that:

is to give someone with no actual heating bill a token amount of home heating assistance — as little as $1 a year in some states, or a single dime a year in California

Now I'll grant I don't know the letter of the State's law, but if the State law says "this program/these funds can be used to pay for heating bills" and the State sends a payment under that program that's not for a heating bill (since there isn't one) so that the individual will qualify for funds from a different program (which is conditional upon the person having received payment under the State heating bill payment prgm), then it sure seems like the State action (to send a "fake" heating bill payment) is wrong. For your conclusion to be correct the State law would have to not specify that the heating bill prgm funds could only be used to pay actual bills--maybe that's true, but it strikes me as unlikely.
I completely agree that the Federal law should be written to take into account the possibility that States would game it in this way, and that the deficiency is therefore mostly the fault of the Feds, but obviously in any sufficiently-complex system (legal or otherwise) there will be a component of the "spirit" of the statute, and it's not wrong to point out when literal actions violate that spirit or intent. Such a violation might not be illegal but could certainly be wrong.

cubanbob said...

The moral here is to abolish all of the programs and give the recipients a time limited fixed amount of money and after that swim or sink.

n.n said...

Achilles:

Another reason to not cow to emotional appeals: the good works are ineffective, inefficient, and redirected; and everyone is the beneficiary of policies that cause a massively distorted economy, that not only do not resolve the issues they purport to address, but actually contribute to their perpetuation.

Well, the dynamic is complicated, and the cause and effect relationships are not immediately obvious. For instance, there is also an effort to compensate for these distortions, which act as positive feedbacks. I wonder how long they can suppress the worst consequences of fiscal policies unbacked by economic development. It seems like they are trying to "stuff the channel" in order create an illusion of achievement.

Rusty said...

If you want them to eat, give them food. If you want them well, give them medicine.
If you want them to buy liquor, drugs and lottery tickets, give them money.

madAsHell said...

If you want them to buy liquor, drugs and lottery tickets, give them money.

Blond hair, and nasty tattoos too!!

Kirk Parker said...

JSD,

Re farm subsidies: it's too bad the free market couldn't come up with a solution to the uncertainties in farming.

Oh, wait...