Hutchison says getting millionaires off food stamps, unemployment would save $20 million

Clarification, 1:44 p.m., Jan. 18, 2012:  This fact check correctly says millionaires don’t qualify for food stamps because households with net income above the poverty level are not eligible. Still, as a reader reminded us, someone with paper assets of $1 million or more – such as valuable property – could qualify for food stamps so long as net income is below the poverty level. We’ve added this wrinkle to the story. It does not change our rating.

As plans to extend a nationwide payroll tax cut worked their way through Congress, Texas’ senior senator fielded a question Dec. 12, 2011, on CNN about how the government could make up for lost revenues -- perhaps $180 billion to $200 billion over ten years.

One proposal that Republican U.S. Sen. Kay Bailey Hutchison gave: "We’re going to take millionaires off food stamps and unemployment insurance which, amazingly, would save $20 million."

Although Congress passed a two-month extension of payroll tax cuts Dec. 23, 2011, the House proposal to extend the cuts for a year awaits consideration -- and it contains the "millionaire" modifications. The cuts reduce from 6.2 percent to 4.2 percent the amount of eligible earnings taken from Americans’ paychecks to help pay for Social Security.

We wondered if Hutchison was right that taking millionaires off food stamps and unemployment insurance would save $20 million.

We realized, for starters, that millionaires already don’t qualify for food stamps.

PolitiFact reported in a related fact-check Dec. 1, 2011, that the food stamp program, formally known as the Supplemental Nutrition Assistance Program, is only open to households where net income is below the federal poverty level -- this year, $1,863 a month for a household of four.

One wrinkle: It’s possible that a household with paper assets of $1 million or more could still qualify, still only if its net income is sufficiently low.

By email, U.S. Department of Agriculture spokesman Aaron Lavallee told us that the department knows of "only one case and one alleged case involving individuals with assets over $1 million" getting SNAP benefits. Lavallee said the confirmed case -- a Michigan man who made headlines in May 2011 for using food stamps despite winning $2 million in a lottery -- was removed from the program and the second case is being investigated.

Mindful there’s no savings in barring millionaires from food stamps, we wondered next how many millionaires collect unemployment insurance. Annual counts of millionaires on unemployment, based on IRS data, appeared in an Oct. 1, 2010, Bloomberg news story and a Nov. 13, 2011, report by U.S. Sen. Tom Coburn, R-Oklahoma:

• 2009: $20.8 million collected by 2,362 millionaires
• 2008: $18.6 million collected by 2,840 millionaires
• 2007: $13 million collected by 2,182 millionaires
• 2006: $12 million collected by 1,972 millionaires
• 2005: $9.5 million collected by 1,647 millionaires

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The Bloomberg article also tells why millionaires can collect: As insurance, rather than welfare, benefits aren’t paid out according to need but according to whether a person has become unemployed. There’s no income test.

And how did Hutchison reach her savings figure? Her spokesman Jeff Nelligan sent us a House Ways and Means Committee breakdown of the House’s payroll tax cut proposal, and directed us to the section describing how it would target millionaires by requiring them to pay a 100-percent tax rate on any received unemployment benefits. That is, any benefits received would have to be paid back.

The Ways and Means breakdown says that making millionaires pay back their unemployment benefits would reduce the federal deficit by $20 million over 2012-2021. Citing Congress’ bipartisan Joint Committee on Taxation, the breakdown says that all told, the government would save $127 million in unemployment benefits that it would not have to pay, but lose $107 million in revenue due to fewer millionaires collecting benefits -- partly because some (or all) millionaires won’t apply for unemployment if the provision passes into law. These figures also appeared in a Dec. 9, 2011, Congressional Budget Office report.

Result: The projected savings -- or more precisely, the 10-year decrease in the federal deficit -- is $20 million.

Finally, we wondered why the government would lose $107 million if the anti-millionaire provision becomes law.

Jim Billimoria, communications director for the Ways and Means Committee, told us that when the government writes fewer unemployment checks:

• Federal tax revenues drop, because unemployment insurance is taxable income.
• State tax revenues drop, because states don’t have to tap their unemployment insurance trust funds as heavily to pay the benefits -- and thus they don’t have to raise state payroll taxes as much as they might have otherwise.

We contacted the CBO and JCT seeking the basis of the $107 million estimate. JCT chief of staff Thomas Barthold told us its estimate took into account predicted income growth, changes in income distribution and projected unemployment insurance claims for the 10-year period.

Our ruling

Hutchison said that getting millionaires off unemployment and food stamps would save the government $20 million -- though she doesn’t acknowledge that millionaires are already barred from the food-stamp program; there’s no new savings possible on that front.

We rate her statement Mostly True.