Asset limits trap people in poverty
If you want assistance from the government to meet your basic needs, you often have to prove that you have next to nothing in your bank account. Programs like the Supplemental Nutrition Assistance Program (SNAP), welfare (Temporary Assistance to Needy Families, or TANF), Medicaid, and Supplemental Security Income (SSI) have asset limits. The purported purpose is to ensure that benefits go to the “truly needy”, or in other words, to people who “deserve” help.
The SNAP asset limit is currently $2,750, or $4,250 if at least one member of the home is age 60 or older, or is disabled. What counts as assets? Mostly bank accounts, and sometimes the value of vehicles owned. Homes and retirement accounts do NOT count, but the value of other assets, like burial plots, may be included in some states.
The practice is draconian and complicated, and it traps people in poverty, because if their savings go above the asset limit, they lose their benefits. According to the Center for American Progress (CAP), “people who receive means-tested public assistance are more likely to be asset poor than low-income people who are not enrolled”. It prevents people from saving money, or from even opening a bank account, leaving them vulnerable to inevitable future economic shocks.
States have considerable leeway to determine what assets to count, through a waiver called Broad-Based Categorical Eligibility (BBCE). BBCE lets states use some of their TANF eligibility rules for SNAP for anyone deemed eligible for a non-cash benefit through TANF. This could be as simple as sending a brochure about TANF to everyone likely to be eligible for SNAP: this brochure is a non-cash benefit allowing states to use looser rules for SNAP eligibility. Most states (38 plus DC, Guam, and the Virgin Islands) use BBCE to waive the asset limit entirely.
Alaska just enacted a law on August 30 that will eliminate the SNAP asset test starting next summer. Currently, Alaska excludes the value of “vehicles used for an exempt reason or with an equity value under $1,500”. The list of “exempt reasons” in Alaska law is absurdly long and amounts to “your car doesn’t count”, but it requires applicants to document that their vehicle meets one of the exemptions, wasting the time and energy of applicants and caseworkers alike.
This unnecessary complexity played a role in the recent SNAP crisis in Alaska, where caseworkers took months to process SNAP applications, instead of the federally required 30 days, causing people to go hungry and food pantries to run out of food. Legislators supporting the bill to eliminate the asset limit heard anecdotes about people “eating dog food, and kids were taking turns eating food every day.”
Texas uses BBCE to increase the SNAP asset limit to $5,000, and to exclude one vehicle worth up to $22,000, counting any value above that limit. The intent is surely to prevent the stereotypical notion of a “welfare queen” driving a fancy Cadillac to the store to use SNAP to buy filet mignon. But the number of applicants with cars worth more than $22,000 has to be extremely low, calling into question whether the state is spending more time and money documenting applicants’ car values than they are saving by preventing these extreme edge cases.
While only 13 states currently use the asset test to limit eligibility for SNAP, those 13 states are home to 6.7 million SNAP participants as of July 2024. It’s important to remember why asset limits are harmful, in case there is an effort to make them more stringent or widespread. The Supreme Court’s recent decision to strike down the Chevron deference precedent throws into question federal agencies’ ability to interpret Congressional intent in legislation. In her dissent, Justice Elena Kagan wrote that this decision “will cause a massive shock to the legal system.” My fear is that this decision will prompt a challenge to Broad-Based Categorical Eligibility. If BBCE were to be struck down, all states would revert to the federal asset limit of $2,750, and it’s anyone’s guess how vehicles would be counted. (Such a ruling would wreak havoc on state SNAP income limits as well.)
The case for reforming welfare in 1996 was that welfare trapped people in a cycle of poverty. Asset limits literally trap people in poverty, but we still have them, and the limits in many states have barely budged in the last 30 years. It is time to end this counterproductive practice once and for all.