Study finds Americans prefer tax credits to government checks

The United States Capitol Building in Washington, D.C.

Americans prefer government programs that distribute benefits indirectly, such as through tax credits, over those that provide recipients direct payments, according to a recent study coauthored by Yale political scientist Gregory Huber.

The study, published in the journal Political Behavior, tested how the way a program delivers its benefits affects its popularity and whether distributing benefits through the tax code obscures certain programs’ regressive characteristics — aspects that advantage the wealthy over those with lower incomes — making the public more likely to embrace them.  

Americans seem to have an innate preference for indirect delivery of government benefits over direct payments,” said Huber, the Forst Family Professor of Political Science. “Most clearly among Republicans, we find that they believe that giving people checks will make them more dependent on the government and that people are more likely to cheat the system when programs are delivered directly.”

Huber and his coauthor, Vivekinan Ashok ’18 Ph.D., a Presidential Postdoctoral Fellow at Cornell University’s Department of Government, based their findings on a series of novel survey experiments on a nationally representative sample.

The first experiment measured people’s preferences for two hypothetical new policy proposals involving childhood nutrition and job training — while varying the method through which the benefits would be distributed. The nutrition program would be distributed either through a $100 monthly debit card or a $100 tax credit for each month. The job-training program’s benefits would be delivered via a tax credit of $7,000 or a yearly payment of $7,000 deposited directly into a recipient’s checking account.

In both cases, respondents were substantially more likely to support the programs when the benefits were delivered through tax credits than through direct cash transfers. According to the researchers, people reported that indirect delivery would cost the government less than direct payments. In the case of the job-training program, people associated the proposed annual direct payment with an increase in their own personal taxes as opposed to the indirect method of offering a $7,000 tax credit. With the childhood nutrition program, respondents believed that people expended more effort to receive the benefit through tax credits than from monthly payments.

Our results show that policymakers may reflect the public’s preferences when they enact programs that use the tax code to deliver benefits,” Huber said. “People prefer tax credits to government checks.”

The second set of experiments measured people’s support for two existing federal programs — the home mortgage interest deduction (HMID) and the unemployment insurance system — after randomly highlighting each programs’ regressive or progressive effects. For example, one group of respondents were informed that the HMID provides eligible households earning between $75,000 and $200,000 double the benefit of households earning less than $75,000. Another group received information framing the program progressively, pointing out that beneficiaries earning less than $75,000 receive twice the benefit of wealthier households as a percentage of their income.

The researchers found little evidence that framing these programs regressively affects their overall popularity, although they did find that people were more supportive of unemployment insurance under a progressive framing than a regressive one.

It turns out that even when you tell people that the HMID benefits the wealthy over the less wealthy, people still support it because they like programs that encourage people to buy homes,” he said. “We found that both programs are popular not because their regressive characteristic are concealed, but likely because people believe they are worthy programs.”  


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