about one-quarter more expensive than the TFP, the cost considerations cannot be ignored. This evidence informed the view that determining the adequacy of the TFP as the benchmark for the maximum benefit appears more pressing today given that 40 percent of the SNAP caseload is receiving the maximum benefit (Eslami et al., 2011), suggesting that SNAP is the primary source of food support for a large fraction of the caseload.
Benefit Reduction Rate
As described in Chapter 2, SNAP benefits are calculated as the difference between the maximum benefit guarantee for a given unit size and 30 percent of the unit’s net income (see Box 5-2). In other words, benefits are reduced by 30 cents for each additional dollar of a household’s net income. This benefit reduction rate (BRR) has remained unchanged since the 1977 Food Stamp Act (see Box 5-2).4 The rationale is that benefits are a supplement to households’ food purchases and that participants with incomes should be able to contribute 30 percent of their own cash resources toward food purchases. The 30 percent figure was based in part on an analysis of 1955 USDA consumption data showing that the median family spent one-third of its income on food (Orshansky, 1957). Since not all of a household’s income is counted to determine the SNAP allotment, in practice the formula assumes that recipients can spend 20-25 percent of their total monthly cash income on food (Committee on Ways and Means, 2004; Ziliak, 2008).
Evidence reviewed by the committee suggests that the BRR of 30 percent does not reflect current spending patterns for most U.S. households. In contrast to the findings of Orshansky (1957), the median family in the United States today typically spends a lower share of its income on food than the BRR assumes. According to the Consumer Expenditure Survey (CES), in 2010 the average “consumer unit”5 spent just under 13 percent of its pretax income on food consumed both at home and away (BLS, 2011a). Lower-income consumers typically spend a higher share of their income on food, but even among low-income families, the fraction spent on food is substantially lower today than in 1955. For example, data from the 2010 CES show that consumers with pretax incomes of $5,000 to $9,999 spent 16.8 percent of their income on food, those earning $20,000 to $29,999 spent 13.7 percent, and those earning over $70,000 spent 11.7 percent (BLS, 2011a).
4Reimbursement of Census Enumerators for Telephone Tolls and Charges, Public Law 88-535 (August 31, 1964).
5“Consumer units include families, single persons living alone or sharing a household with others but who are financially independent, or two or more persons living together who share expenses” (BLS, 2011b).