Milton Friedman once said, “Nothing is so permanent as a temporary government measure.” And that certainly includes “temporary” tax increases.

In Mississippi where I live and work, residents in the capital city of Jackson know that very well. Voters recently approved a $65 million bond issue to cover maintenance woes that have long plagued the Jackson Public School District. It was sold by supporters as “not a tax increase,” but a continuation of a previous tax increase from a previous bond measure that had been paid off.

Had voters in Jackson rejected the measure, there property taxes would have decreased five mills. The school district currently has, and will continue to have, the highest taxes in the metro area. Jackson residents pay 84.01 mills to support a school district that has been rated “F” by the state for the previous two years. Residents of nearby “A” or “B” rated districts pay between 54.55 and 67.94 mills.

But what occurred in Jackson isn’t much different than what we have seen throughout the country. And it’s been going on for longer than we probably imagine.

In 1936, Pennsylvania adopted the Johnstown Flood Tax, a temporary 10 percent tax on liquor to help victims of a flood rebuild. It was set to expire on May 31, 1937. That didn’t happen. By 1942, the tax collected $42 million and the town had been rebuilt. The tax remained. Eighty-two years later, the temporary, 10 percent tax is now a permanent, 18 percent tax.

Temporary taxes became very popular during the recession a decade ago. Faced with shrinking revenue, states and municipalities enacted numerous “temporary” tax measures. Many were either made permanent or replaced with new taxes.

In California, personal income taxes were increased by 0.25 percent on all rates and the sales tax rate increased from 7.25 percent to 8.25 percent. They both expired, but were replaced by new taxes via referendums. The sales tax rate was increased to 7.5 percent, a quarter-point increase from the original rate and personal income taxes on top earners were increased.

In Connecticut, a temporary 10 percent corporate income tax surtax was extended twice and increased to 20 percent.

In Delaware, the state temporarily increased the income tax rate for top earners from 5.95 percent to 6.95 percent. By 2014, the increase had been reduced to 6.6 percent as it was made permanent. Residents were still hit with a .65 percent increase. Estate and business tax increases were also made permanent.

In Kansas, sales tax rates were temporarily increased from 5.7 percent to 6.3 percent. The state then reduced the rate to 6.15 percent and made it permanent, reflecting a .45 percent increase.

And more recently in Louisiana, the state temporarily raised sales tax rates from 4 percent to 5 percent. The tax increase was set to expire on June 30 of this year. Instead, the state adopted a 4.45 percent sales tax, a .45 increase from the previous tax rate.

One could argue that many of the recent tax increases made permanent were actually at lower rates than their original temporary hikes; thereby resulting in tax “relief.” This is similar to calling a 3 percent increase to a government agency a “reduction in spending” or a “cut” because the agency had planned or requested a 5 percent increase in its budget.

It’s semantics, and everyone knows it, especially the proponents of the higher taxes. In many places, residents are paying higher taxes than they were prior to the recession. Calling it by another name does not stop it from being a net increase, even if it is slightly less than the “temporary” increase.

The goal, amongst the tax proponents, is for residents to get use to the higher tax and eventually it just becomes accepted. Then when a tax increase expires, or a bond is paid off, a politician or government agency bureaucrat tries to convince you that this new tax increase is not an increase at all, but rather, it is a commendable action to keep your tax rates the same.  It’s like magic. Think of it is a slight of words, rather than a slight of hand.

So the next time you hear a politician sell you on a “temporary” tax increase, smile and tell them you’ve seen this act before.

Lotteries tend to be popular with the public because they conjure up dreams of easy money and the good life. Indeed, Mississippi voters approved the concept of a state lottery in 1992 when they repealed a constitutional ban on lotteries. That same year, Mississippi’s first dockside casino opened. While many forms of gambling are now legal in Mississippi, state law still prohibits the operation of a lottery and the in-state purchase of lottery tickets. 

In evaluating whether Mississippi should legalize the lottery, lawmakers should realize, first and foremost, that the lottery is a kind of tax – and that, in particular, it is a regressive, or unfair, tax that has negative social impacts.

The Lottery is a New Tax

The primary purpose of a state-monopolized lottery is to generate revenue for the state. This reality is not well understood. There are essentially two types of lotteries: those operated by private vendors; and those controlled by government. Because private lotteries have historically been plagued by corrupt practices (and not infrequently government-run lotteries as well), states have sought to control their own lotteries.

Currently, all but a handful of states have state-controlled lottery monopolies. These monopolies are unique insofar as they are not “natural monopolies.” Road building, sewerage provision, and until recently, mail delivery, are examples of natural monopolies typically presumed to be properly controlled by government. In the case of the lottery no overriding financial or logistical reason justifies a government monopoly.

The state’s monopoly over the lottery allows it to charge a price for the lottery ticket that is well above what a private lottery might charge. This excess charge is essentially a tax. The tax is around 27 percent, but it varies in every state. This 27 percent surcharge is what in gambling parlance is called “the vig.” It’s what “the House” gets regardless of the outcome. In the case of the lottery, the House is the state – and it has a big edge. After the government gets its take, the rest of the money generated by the lottery will go toward winnings and administration. Then, the actual winner has to pay state and federal income taxes on top of that.

It might seem strange to think of the lottery as a tax. The Tax Foundation explains:

Lottery revenue meets all three tests for defining a tax. Current U.S. Supreme Court Justice Stephen Breyer laid out the criteria for defining a tax when he decided the San Juan Cellular case for the First Circuit Court of Appeals in 1992. Breyer argued that a judge should consider who imposes the assessment, who pays the assessment, and what the revenue is spent on.

In the case of a lottery, the Mississippi legislature would be imposing the assessment – just like any other tax, as opposed to a targeted fee imposed by a state agency. Likewise, lottery ticket buyers represent “a broad swath of the public,” rather than a “narrow group that benefits from a particular government service.” In its application, the lottery thus functions like a tax, rather than a fine or fee. Finally, lottery revenue is generally fungible, or at least spent on a “broadly defined benefit.” In short, the lottery meets all three legal tests for defining a tax.

The following statements by lottery proponents confirm this conclusion:

“The Legislature is not passing any revenue (tax increase). That (lottery revenue) is money available for education – should be spent on education.” – Mississippi Attorney General Jim Hood

“When you’re looking at some of the challenges that we’re having and you see a revenue bill that would generate somewhere between 50 and 60 million dollars – just an estimate – I think that's something that needs to be taken seriously by the members of both the House and the Senate.” – Mississippi Governor Phil Bryant

“I think it should go to education. But in as much as when we earmark money, sometimes we take that money from that department, so with that in mind, the best thing would be to just put it in the general fund.” – State Rep. Alyce Clarke

In summary, the lottery is a “revenue bill” that will be passed with the intention of generating money for the General Fund, or at least, for a broadly defined purpose, such as education. In other words, it meets the legal definition of a tax.

Lottery proponents often balk at defining the lottery as a tax, asserting that buying a lottery ticket is voluntary. Because the state would hold a monopoly over the lottery, however, the tax is not voluntary at all. In order to purchase a lottery ticket, consumers must pay the lottery tax. True, participating in the lottery is not mandatory, but neither is purchasing a car, earning income, or doing all manner of things that are taxed. As long as the primary purpose of the lottery is to generate revenue, and as long as a significant portion of lottery profits are collected as revenue, the lottery is a tax.

Under Mississippi’s joint legislative rules (rule 18), all bills generally related to revenue must be accorded a 3/5 vote by the legislature. Because the lottery is a tax (and, at a minimum, related to raising revenue) any bill that would create a state-controlled lottery must pass by a 3/5 vote in the Mississippi legislature. Otherwise, the lottery will be challenged in state court.

Because the lottery is a tax, its fiscal impact must also be evaluated in light of other forms of taxation. While all taxes influence behavior in some way, economists generally agree taxes should have low compliance costs, be fairly applied and minimize negative social impacts.

The Lottery is a Bad Tax

In comparison to other taxes, the lottery is particularly bad policy. To begin with, the lottery is an inefficient tax with high administrative costs. Observes economist Dr. Roy Cordato: “To raise a dollar’s worth of state revenue through a lottery could cost anywhere from 20 to over 50 times more than it would cost to raise the same dollar through other forms of taxation.” These administrative costs are thought to range between 15 percent and 20 percent and go toward advertising and paying retailers who sell lottery tickets.

In addition, the lottery is an unfair, or “regressive” tax. Generally speaking, “a regressive tax imposes a greater burden (relative to resources) on the poor than on the rich.”

In 2015, Americans spent $73 billion on lottery tickets. That’s about $630 for every household in the United States. It’s also about the same amount spent on the SNAP (Food Stamps) program annually. According to the Associated Press, Americans spend more on the lottery than on “movies, video games, books, music and sports tickets combined.” 

Every American household, however, is not spending $630 on the lottery. Generally, the poorest one-third of Americans buy more than half of all lottery tickets. Even the North American Association of State and Provincial Lotteries, an industry association group, acknowledges 25 percent of lottery players earn less than $25,000 annually.

A report from Harvard’s Shorenstein Center on Media, Politics and Public Policy reviews some of the academic literature demonstrating the regressivity of the lottery tax:

A 2012 report in the Journal of Gambling Studies finds that “those in the lowest fifth in terms of socioeconomic status (SES) had the ‘highest rate of lottery gambling (61%) and the highest mean level of days gambled in the past year (26.1 days).’”

A 2011 study, also in the Journal of Gambling Studies, concludes the “poor are still the leading patron of the lottery.”

A 2010 report in the Journal of Community Psychology observes that “lottery outlets are often clustered in neighborhoods with large numbers of minorities, who are at greatest risk for developing gambling addictions.”

Likewise, a 2009 survey commissioned by the South Carolina lottery found that those earning less than $40,000 a year constitute the majority of lottery players, even though they make up less than one-third of the state’s population. Another 10-year study that looked at lottery sales data in 39 states found “a strong and positive relationship between sales and poverty rates” (but not a similar relation between poverty and movie ticket sales, movies being an alternative form of inexpensive entertainment). The authors, however, conclude that “the poor are relatively more likely to see the lottery as a financial investment, and relatively less likely to play for entertainment.” Similarly, other research suggests lottery ticket purchases are financed by forgoing basic necessities. Generally, the breakdown is a 3 percent reduction of spending on food; and a 7 percent reduction on rent and other items.

Again, all this is to say that the lottery is a regressive tax disproportionately paid by low-income people.

In terms of tax policy, it’s also helpful to consider what kind of behavior a lottery tax encourages or discourages. The real question here is whether a state lottery would encourage more gambling or whether it would merely capture gambling that is already occurring via other lotteries in neighboring states.

The answer is complex. Clearly, Mississippi is hoping to both capture a market that exists (and is being diverted to other states) and also develop a new market. The strongest argument for a state lottery is that the state is losing lottery tax revenue to other states when Mississippi residents buy lottery tickets in other states. Interestingly enough, the two states immune to this dynamic – Alaska and Hawaii – do not have state lotteries.

Clearly, for many Mississippi residents, travelling to another state to buy a lottery ticket constitutes an investment of time and money – what economists call an “opportunity cost.” Some evidence suggests that, all things being equal, large jackpots are necessary to attract middle-class and out-of-state customers to buy out-of-state lottery tickets. When the jackpot is high enough, people will drive to another state to buy a lottery ticket. These same customers are more likely to play the lottery as a form of entertainment.

By contrast, low-income players disproportionately favor scratch-off (instant win) lottery cards; and the largest segment of lottery revenue (as high as 80 percent) comes from scratch-off games. For this reason, scratch-off cards represent the worst, and most regressive, form of lottery taxation. While the state is likely “losing” some revenue to players who cross the border to play scratch-offs, the spontaneous nature of such play suggests the loss is minimal. No doubt, a legalized lottery will see targeted advertising aimed at creating new players for these games. As in other states, much of this advertising will appear in low-income neighborhoods. As in other states, every year will see new marketing plans aimed at attracting new players. As in other states, new and more games will be developed with the hope of increasing frequency of play. In order to keep generating revenue from the lottery tax, the government will become the foremost proponent of gambling in Mississippi.

Some readers will note that this brief is silent about the ethics of a lottery. From an economic perspective, a lottery is destructive because it is a nonproductive activity. As stated above, the lottery, at best, is a form of entertainment; at worst, it is encouraging poor financial decisions by those who can least afford to gamble away their resources. In terms of tax policy, the lottery constitutes a high new tax with a regressive impact on the majority of players.

The HOPE Act restores the 1990s welfare-to-work reforms that “ended welfare as we know it,” to use Bill Clinton’s phrase. These policies were gutted by the Obama administration as a backdoor way to expand welfare and to expand Obamacare.

In passing HB 1090, Mississippi has again become a leader in welfare reform, just as we led the way nationally with Gov. Kirk Fordice’s “Work First” reforms. According to an independent review of the law, it moves “Mississippi to the forefront of states in overall benefits integrity and the move from reliance on benefit programs to employment.”

Here are 10 reforms the HOPE Act accomplishes:

It gets people back to work … By requiring childless, able-bodied adults to get back to work or obtain training or attend school to keep receiving SNAP (food stamps).

It removes millionaires from food stamps … by restoring federal income and asset tests. (These are the welfare-to-work reforms from the 1990s.)

It tracks out-of-state welfare spending ... to stop welfare fraud and abuse (think: ATMs in the Walt Disney World area).

It verifies immigration status … to remove illegal aliens using stolen social security numbers to illegally access welfare (under federal law, illegal aliens are ineligible for welfare, but no one’s been checking).

It verifies residency … to make sure people in other states are not fraudulently taking advantage of Mississippi welfare programs.

It helps state employees … by giving them real-time data they can use to verify eligibility, eliminating duplicative and inefficient procedures.

It saves Mississippi – and federal – taxpayers millions a year … by removing fraudsters and identity thieves from our welfare rolls as soon as we discover their presence.

It makes sure welfare benefits are properly used … by banning EBT card usage at ATMs in liquor stores, strip clubs, casinos, theme parks and other questionable locations.

It requires state agencies to work together and to share eligibility data … so that people can’t conceal vital information that would illegally increase benefits.

It saves state money by drawing down federal funding … to help pay for cutting-edge fraud prevention measures – while also saving federal funding otherwise wasted on fraudulent Medicaid and welfare enrollment.

As a bonus, the HOPE Act accomplishes all this by preserving existing benefits for those who are truly eligible, preserving the long-term integrity of our Medicaid and welfare programs.

When it comes to fixing the problems facing our state, government’s best strategy is often to get out of the way. That’s especially true when it comes to expanding internet access to rural areas.

Despite efforts by state and local governments to improve internet access, Mississippi ranks 49th in the U.S. for broadband coverage. This has officials in some communities looking for a government-subsidized solution: municipal broadband.

Numerous government internet projects all across America have already failed. Likewise, many municipalities considering such projects already have several internet providers available to them without government getting involved.

While Mississippi doesn’t need local governments using tax dollars to build needless boondoggles, it does need a way to expand internet service to those not currently served. The fastest and cheapest way to make that happen is through a project recently announced by Microsoft president Brad Smith.

The project utilizes unused television stations, known as “white spaces,” to create a sort of high-speed “Super Wi-Fi” broadband service that can connect Mississippi’s rural communities without running broadband infrastructure to remote areas. The only thing standing in the way of this dream becoming a reality is the Federal Communications Commission.

The agency must move forward with its proposal to set aside three currently unused TV frequencies in each market in order for white spaces internet coverage to operate. Once the FCC takes that step, companies can begin expanding high-speed internet coverage to every hillside and hollow in Mississippi — without the high costs and environmental impacts associated with laying miles of wires to build a broadband communications network.

Other countries are already testing white spaces internet. In Malawi, one of the least developed nations in Africa, private sector providers are preparing to use television white spaces to rapidly bring Wi-Fi to millions of people. India is also looking to pioneer the use of white spaces to bring broadband coverage to rural areas.

If places like Malawi and India can successfully use white spaces to expand internet coverage, the FCC should allow rural Mississippians to benefit from the same technology.

That same white spaces technology is another example of why local governments should avoid broadband boondoggles: government internet programs are too expensive, become outdated too quickly and fail to provide service to people who can’t already access the internet.

That didn’t prevent Biloxi from seeking state permission to set up their own broadband network last legislative session. The legislation (HB 1716) promised to bring “more accessible, affordable and ubiquitous Internet services to all businesses and residents within the city at broadband speeds of at least one gigabit.” The current FCC standard for broadband coverage is 25Mpbs. Biloxi community leaders were ambitiously seeking to establish a system offering speeds 40 times faster than that.

In neighboring states, municipal broadband projects have failed spectacularly, leaving taxpayers on the hook for millions. Opelika, Alabama, for instance, has sunk $43 million into its city’s broadband network, shifting costs to electric ratepayers. Lafayette, Louisiana, has spent $160 million on its subsidized broadband network, at a cost of $9,750 per subscriber. Memphis lost more than $32 million on its network, which was later sold for a measly $11.5 million.

Government is already the largest employer in Mississippi, and it is already doing too much. Government needs to stay out of the broadband market, which is competitive and requires ongoing strategic investments in new technology to keep up. While high-speed internet can be a powerful economic catalyst for Mississippi communities, these same communities should avoid using scarce taxpayer resources to invest in technologies the private sector is better suited to provide.

Both the FCC and the Mississippi Legislature should get out of the way and let the marketplace bring affordable, high-quality internet service to Mississippi communities. Just because a problem exists, doesn’t mean government should try to solve it.

Jameson Taylor, Ph.D., is vice president for policy, Mississippi Center for Public Policy.

By Mike Hurst

Recently, while most Mississippians were busy working, raising families and just trying to get by, the state of Mississippi held a little noticed hearing to consider imposing taxes on a significantly larger number of our residents. This occurred after the Mississippi Legislature had already left town, leaving no opportunity for our elected officials to publicly debate this important issue at the state Capitol or cast votes on it. Rather, as has unfortunately become a fact of life in our day and age, unelected bureaucrats in a state government agency, with little fanfare and even less explanation, began a process to expand regulations that will require many Mississippians to pay more taxes with minimal public input and even less accountability.

A few months ago, the Mississippi Department of Revenue filed a notice with the Secretary of State's Office, signaling that DOR would be amending several of its existing regulations. One of these revised regulations would expand the definition of hotels and motels to include rooms in people's homes, as listed on popular internet websites like Airbnb or VRBO. Another proposed DOR regulation expanded the application of local tourism taxes.

These regulatory changes proposed by DOR come on the heels of another recent attempt by DOR earlier this year to require out-of-state companies to collect taxes on sales made to Mississippians over the internet, despite the fact that the U.S. Supreme Court has clearly stated this is illegal and DOR's own commissioner has admitted that what DOR is doing is "probably unconstitutional."

State law requires DOR to timely notify the public of proposed rule changes. DOR did not do so. State law also requires DOR to issue a statement showing the impact of proposed rules on the economy. Again, DOR failed to do so. State agencies are required by law to prepare such economic impact statements when adopting significant amendments to existing regulations. However, in the 11 years since such statements have been required, DOR has never issued one!

The most troubling aspect of all of these proposed regulations is that DOR's actions represent a trampling of the doctrine of separation of powers in our form of government. This unelected bureaucracy is unconstitutionally commandeering authority from our legislative branch to make laws, rather than simply implementing them.

Regarding DOR's proposed tax on people's homes, bills were introduced in both houses of the Legislature during the 2017 legislative session to change the definition of hotel and motel under the local tourism tax to include short-term rentals of residential properties.

None of these bills became law.

Despite our elected representatives choosing not to change the law, this unelected state agency is now attempting to legislate by regulation. The same thing happened with internet taxation, as the Legislature considered and rejected changes to state law to allow DOR to tax out-of-state sellers like Amazon. Again, notwithstanding our elected officials opting not to enact such a law, DOR is proceeding with regulations to do it anyway.

This silent and gradual encroachment into our lives by an unelected and unaccountable Fourth Branch of government is deeply troubling for our form of government and the future of liberty. This governing by regulation is not what our founders intended, not what was written into the Constitution, and not what our government was built upon. Our elected officials need to step up and put a stop to this regulatory tyranny. But we the people also need to let our voices be heard by getting more involved in the rule-making process and challenging bad rules in court.

The only way unaccountable agencies are going to change is if we make them do so.

By Dr. Jameson Taylor

Every year my aunt sends me $5 worth of lottery tickets for my birthday. One year I won $2; another year $1; this year, I won an additional ticket, which also proved a loser. The closest I have come to recouping my aunt's investment is the year I won $4. I was thrilled, but not as thrilled as I would have been had she sent me cash instead. I just don't have the heart to tell her that her birthday present is little more than a tax receipt printed on fancy, scratch-off paper.

 A lottery is only good for one thing: concealing the creation of a new tax. We've all heard the stories of how much revenue a lottery could generate. Governments generate revenue in essentially three ways: taxes, fees and fines. According to the Tax Foundation, the legal definition of a tax is that its primary purpose is to raise revenue. A fee, on the other hand, is "a charge imposed for the primary purpose of recouping costs incurred in providing a service" while a fine is "imposed for the primary purpose of punishing behavior." Based on these distinctions, the Tax Foundation concludes, "The lottery is in part a tax ... the classic definition of a tax, upheld in nearly every federal and state court."

The North American Association of State and Provincial Lotteries boasts that 27 cents of every $1 spent on lottery tickets goes back to the government. This payment is not to be confused with taxes generated from winnings. In other words, state-run lotteries impose a 27 percent tax on the mere act of purchasing a lottery ticket.

It is irrelevant that buying the ticket is voluntary. Taxes are imposed on all sorts of voluntary activities, ranging from using a phone to going to the movies. What is unique about a lottery is that it is a state-run monopoly on a nonessential service -- very different from natural monopolies, like water and electricity provision, with high startup costs. The purpose of the lottery monopoly is not to provide for a public need or to protect the public welfare, but to generate revenue. It's a tax.

Moreover, the lottery is a bad tax. It's inefficient, with much higher administrative costs than other forms of taxation, and it encourages nonproductive, if not downright destructive, behavior.

Let's look at a similar case: the ongoing debate over marijuana legalization. Economists believe marijuana legalization could generate billions of dollars in tax revenue. In 2016, Colorado collected $200 million in taxes on $1 billion in "legal" marijuana sales. That's a lot of money that could be used to fund roads and education. But at what cost? As with the lottery, some people would become addicts. As with the lottery, sales would drain money from other, likely somewhat more productive, purchases and activities. As with the lottery, lower-income, less educated users would consume a disproportionate share. In the case of marijuana legalization, the government would be condoning and profiting from a questionable activity. In the case of lottery legalization, the government would be initiating, advertising, promoting and bolstering a questionable activity.

While lottery advocates claim "people from all walks of life play the lottery,” they often sidestep the question of who plays the lottery most frequently. (As I mentioned, even I "play the lottery" once a year on my birthday.) Research shows that those in the lowest income bracket play 2.5 times more than everyone else and that "increased levels of lottery play are linked with ... males, blacks, Native Americans, and those who live in disadvantaged neighborhoods." A recent 10-year analysis of the New Jersey lottery confirms the typical player has a below-average income and lacks a college degree.

Those who tend to play the lottery most often, it seems, are either poor or think of themselves as poor. In this respect, the lottery is a tax on false hope. And while it may not be the government's business to tell people what or who to hope in, government shouldn't be monopolizing and encouraging such deception.

We already have enough taxes in Mississippi, and we already have enough false hopes. Let's not add anymore with a lottery.

MCPP Praises Passage of Welfare Reforms

“will help more Mississippians move from dependency to dignity, from poverty to prosperity, and from welfare to work.”

(JACKSON) – Mississippi Center for Public Policy President Forest Thigpen praised legislators for passing HB 1090, which will curb fraud and abuse in Medicaid and other welfare programs.  

Thigpen said, “These reforms will help more Mississippians move from dependency to dignity, from poverty to prosperity, and from welfare to work by eliminating loopholes that are found in current welfare policy. Among other things, it will restore the work requirements that were a key to the success of welfare reforms enacted by President Bill Clinton twenty years ago, which have been gutted over the last few years.” 

Thigpen said the bill will help focus key welfare programs on those who are truly eligible by removing people who have moved to other states and people who have died.

“Other states have saved hundreds of millions of dollars by implementing just some of the actions that will now be required of Medicaid and the Department of Human Services,” Thigpen said.

Among the provisions in HB 1090:

•   Requires able-bodied adults without children to transition from welfare to work.
•  Restores income and asset tests to the food stamp program (now known as SNAP).
•  Tracks out-of-state spending to stop welfare fraud and abuse (for example, Electronic Benefit Transfer (EBT) card use at Disney World).
•   Protects Medicaid and welfare for our state’s most vulnerable citizens by giving state employees new tools to identify and eliminate fraud.
•  Saves Mississippi – and federal – taxpayers millions a year by removing fraudsters and identity thieves from our welfare rolls.

“The HOPE Act will help Mississippi lead the way in getting people back to work, saving tax dollars and eliminating welfare fraud,” said Dr. Jameson Taylor, vice president for policy at the Mississippi Center for Public Policy.

The Mississippi Center for Public Policy is an independent, non-profit organization based in Jackson. It works to advance the ideals of free markets, limited government, and strong traditional families. Its work is supported by voluntary, tax-deductible contributions. It receives no funds from government agencies for its operations. To learn more about MCPP, visit www.mspolicy.org.

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Honor System for Welfare Not Working

Trust, but verify. Seems like commonsense. Unfortunately, government programs are often lacking in common sense. According to the Miss. Department of Human Services, self-verification is the method used to determine eligibility for Food Stamps, also called the Supplemental Nutrition Assistance Program (SNAP). The director of Fraud Investigation with the department acknowledges: “The application process for SNAP is based on an ‘honor system,’ trusting that applicants truthfully submit their income and number of dependents.” It should come as no surprise that some people aren’t telling the truth about their identity or residency or income when applying for welfare, whether it be Food Stamps or Medicaid. What is surprising, unbelievable really, is that the state is not really verifying who people are, where they live, and whether they are actually in need. The result is millions of taxpayer dollars lost to fraud, waste and abuse. This is savings that could be going to help the nearly 8,000 Mississippians with disabilities and other serious needs on a waiting list for Medicaid’s Home and Community Based Services. It is savings that could be going to patch holes in our Medicaid budget, or state budget.

A bill (HB 1090) moving through the state legislature would require Miss. welfare programs to use a verification service to check for things like identity and residency. Using databases easily accessible in the private sector, this service would discover whether a Social Security number is being fraudulently used. When Illinois ran a similar audit they found 14,000 dead people on their Medicaid rolls. The eligibility review would also check things like whether someone on Mississippi Medicaid is paying property taxes in another state – a likely sign the recipient is not a Mississippi resident. It would check incarceration status and death records and immigration status – all the things any reasonable voter assumes are already being verified to protect the integrity of our welfare programs.

HB 1090 also includes commonsense reforms like expecting SNAP enrollees to cooperate with a fraud investigation. The bill would track where welfare benefits are being accessed and spent. When Maine ran such a check, they found $3.5 million worth of transactions in Florida, including hundreds of thousands of dollars in withdrawals from ATMs near Walt Disney World. When the state of Florida ran such a check, they found 3,500 of their Food Stamp recipients were also receiving Food Stamps in at least one other nearby state, including Mississippi.

Those who claim welfare fraud is not a problem in Mississippi are mistaken. It is so much of a problem that in 2015 the Mississippi Department of Human Services (DHS) was awarded a $1.9 million federal grant to help eliminate fraud. It is so much of a problem that the state auditor has found millions in questionable TANF costs and warned that the “failure to maintain supporting documentation for eligibility as well as not monitoring and reducing benefits” as required could result in the state having to repay federal funds.

Similarly, we have seen recent arrests for welfare fraud in several counties. According to news reports, DHS has been “knocking, one door at a time, looking for people who’ve applied for food stamp benefits that aren’t entitled.” Instead of going door-to-door, we can harness the power of technology to catch a good bit of that fraud with the click of a button. 

It is no accident that the states most committed to a robust social safety net are also rooting out fraud most aggressively. The first state to proactively verify its Medicaid rolls was Pennsylvania, which launched its own program in 2011. They identified 160,000 ineligible welfare recipients in the first 10 months and saved the state nearly $300 million. Illinois, Minnesota, and Massachusetts soon followed. Altogether, those four states are seeing a combined savings of $1.3 billion annually. We estimate Mississippi would save $40 million annually, based on a fraud rate of 10 percent.

If we want to protect our Medicaid and other welfare programs for those who are the poorest of the poor, the disabled, the elderly, we need to eliminate fraud and waste. We owe it to all Mississippians – including those who are truly eligible to receive these benefits – to be good stewards of these programs.

Jameson Taylor, Ph.D.
Vice President for Policy, Miss. Center for Public Policy