Eliminating Asset Limits Helps Families Save
Read Prosperity Now's?new Federal Policy Brief?on Asset Limits for Federal Programs.
As Congress debates the Farm Bill, we here at Prosperity Now are focused on an eye-glazing phrase: "broad-based categorical eligibility." That incomprehensible wordsmithing refers to a feature of the SNAP program (formerly Food Stamps) that allows families that receive TANF benefits to automatically receive SNAP benefits. This simplifies SNAP administration, and, crucially, it allows states to eliminate the $2,000 asset limit that would otherwise apply to most families on SNAP.
Raising asset limits is a no-brainer for state administrators who want low-income families to save, which is why 41 states have used this provision to raise or eliminate SNAP asset limits. But this wonderful provision is on the chopping block. The House Farm Bill proposal eliminates "broad-based categorical eligibility," reinstating the $2,000 asset limit for every state.
Will this really impact families all that much? Yes, it will.
Just as an example, consider the Earned Income Tax Credit (EITC), which boosts tax refunds for low-income working families. Last year, 27 million households qualified for the EITC, with an average refund boost of $2,200.
Now think about what happens if a family decides to save that refund for the future. Currently, in states that have eliminated the SNAP asset limit, families can put that tax refund away for a rainy day without fear of losing public benefits that they need to make ends meet. But without "broad-based categorical eligibility," families that choose to save that money risk losing their SNAP benefits.
So let's review the House Farm Bill proposal
While families in most states can currently save without fear, the House Farm Bill reforms will give families two options:
Earn income -> get tax refund -> save your tax refund for the future -> lose your SNAP benefits
Earn income -> get tax refund -> spend your tax refund today! -> keep your SNAP benefits
How is this better than letting low-income working families save for the future without penalty? It's not. This is bad policy that eliminates state flexibility and stops families from investing in the long-term for themselves and their children.
For more information on asset limits, read our new Federal Policy Brief, which describes how eliminating these barriers to saving can help families that are struggling to get ahead.