How to Live Like a King on Welfare in Wisconsin

It pays to be poor in Wisconsin, and you don’t even have to be that poor to enjoy a windfall of government benefits. A family of four living in Madison making around $64,000 a year qualifies for at least $70,000 worth of public benefits, according to an analysis by the MacIver Institute.

That includes childcare subsidies, housing vouchers, food stamps, and Medicaid. These benefits are available to anyone making 200% of the Federal Poverty Level (FPL).

The Wisconsin Shares Child Care Subsidy Program pays up to 100% of families’ childcare costs. It covers up to 152 hours per child per month. The subsidy is given to families on a special MyWIChildCare EBT card, which is then used to pay the daycare facility. It can only be used on daycare. Depending on their income level, some families also have to pay a small co-pay per hour of care.

Daycare providers could easily take advantage of this arrangement if the state did not put cost limits in place. It tells providers exactly how much they are allowed to charge and still participate in the program. Additionally, daycares cannot charge families participating in the program one rate and everyone else another rate. The rate must apply to everyone. This approach might help protect the government from abuse, but it is also big cost driver in the industry that impacts everyone. Whatever the state sets as the maximum rate for the subsidy program inevitably becomes the price floor throughout the childcare industry statewide.

For a family of four living in Madison and making around $64,000, the benefit maxes out at $2,511 a month. Daycares in Dane County are allowed to charge up to $1,477 per child per month for fulltime care (up to 152 hours a month). Therefore, the total bill comes out to $2,955. The family copay is $443.84. Their maximum total annual benefit is $30,132.

If you’re a family of four living in Madison with the same childcare requirements, you’d be paying $35,465.28 a year. It probably would be a lot less if the government didn’t decide that’s how much daycare providers need to charge in order to maximize their revenue from the subsidy program.

Each month, about 19,000 families use the program, 34,000 children are served, and the state spends around $32 million.

The term “Section 8 Housing” brings some pretty vivid imagery to mind, but the program has changed a lot over the years. Participants in the program are no longer required to live in ghettos. Instead, they get housing vouchers and can live wherever they want, as long as the landlord is willing to accept them.

Here’s the basic deal. Participants pay 30% of their income towards rent, and the government takes care of the rest. Just as with Wisconsin’s Child Care Subsidy, the government has to have limits in place on how much it’s willing to pay. And so, the US Department of Housing and Urban Development determines the average rate for every metro area in the US. That’s how much a landlord is allowed to charge for rent and still be able to participate in the program. Whatever rate landlords charge, it must be the same for everyone. They can’t charge people more because they’re in Section 8. Naturally, whatever the government sets as the maximum rate for Section 8 becomes the price floor for everyone in the area.

According to HUD, the average monthly rent for a three-bedroom apartment in Madison is $1,935. A family of four in the program making about $60,000 a year would have to pay 30% of its income towards rent, which comes out to $1,526.25 a month or $18,315 a year. The voucher would cover the remaining amount of $408.75 a month or $4,905 a year.

The Housing Choice Voucher program is administered by regional housing authorities. In Madison, it’s run by the City of Madison Housing Authority, which pays out about $11 million to local landlords each year. It’s hard to get into the Section 8 program. There are currently 1,600 families in Madison enrolled. There’s a lottery to apply, but the program is currently at capacity and the lottery is closed. It might be a great deal for those on the program, but for everyone else it means artificially high rent directly tied to the government’s cost controls.

The City of Madison also offers a utility allowance for Section 8 beneficiaries. For our family of four, it means $293 a month ($3,516) in additional benefits.

FoodShare, QUEST, SNAP, food stamps – they’re all the same thing. The program is funded by the federal government through the US Department of Agriculture, and it’s administered by the states. In Wisconsin, the program is called FoodShare. The benefits for a family of four making under 200% FPL is $994 a month. The total annual benefit is $11,700.

There are several deductions that enable people with higher income levels to also access the program. For our family of four, there is a $217 standard credit, $538 Heating Utility Credit, and a $375 Limited Utility Credit. Plus, if you have a job, 20% of your income can also be deducted. Combined, these deductions mean a family of four making over $85,000 annually could still be collecting $994 a month in FoodShare benefits.

Two more things you might want to know. Unused funds carryover to the next month. FoodShare cannot be used on nonfood items, alcohol, tobacco, hot food, or to feed household guests.

BadgerCare Plus is Wisconsin’s medical assistance program for children and adults in low-income households.

Children qualify for coverage if they live in households making 200% FPL or less. Able-bodied adults only qualify for the program if they make less than 100% FPL. That means the adults in our hypothetical family of four making $64,000 don’t qualify, but their children do, and that makes a big difference on their monthly healthcare bills.

The average cost of employer-provided health insurance to employees is $132 a month for single coverage and $625 for families. If both adults are working and have an employer provided plan, they’re only paying $264 a month for their individual plans while their children go on BadgerCare Plus. The total savings is $361 a month or $4332 a year.

For the family’s employers, the benefit is also significant. They pay $668 for an individual plan and $1,650 for a family plan each month. By providing two individual plans rather than one family plan, the employers are saving a combined $3,768 a year.

So far, our family of four has collected about $54,500 of various welfare benefits by keeping their income below 200% FPL (about $64,000 a year). They would have to make over $118,500 a year to pay for all that themselves. However, if they did make that much money, they’d also be paying higher taxes.

At $64,000, they’re paying a total of $13,500 a year in federal and state income tax (including FICA). If they made $118,500, they’d be paying $32,900. That’s a difference of $19,400.

If you take all the taxes out of the picture, that family is clearing $50,500 in salary and $54,500 in direct benefits, for a total of $104,500.

Our family of four earns $64,000 and qualifies for a total of $74,000 in public benefits (including the tax breaks). That puts their total income at $138,000.

This scenario is completely possible, but it is admittedly unlikely. The state keeps track of income levels for its various programs’ participants, and most of them have very low incomes. For example, even though a family of four can make up to $5,358 a month and still qualify for FoodShare, the average family of four enrolled in the program only makes $1,428 a month. Two adults could earn a combined income of $5,358 a month by working fulltime for $16.75 an hour. $1,428 a month could be earned by one adult working fulltime for about $9 an hour.

It is interesting that families receiving welfare benefits don’t push closer to the eligibility limits and that families that earn high incomes don’t enroll in those programs. There are probably many psychological and sociological factors at play. Regardless, all of these benefits combined do provide a powerful incentive for workers to limit their productivity and an excuse for employers to offer lower pay and benefits.