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Public Attitudes Toward Social Spending in the United States: The Differences Between Direct Spending and Tax Expenditures

Abstract

This paper uses a survey experiment to examine differences in public attitudes toward ‘direct’ and ‘indirect’ government spending. Federal social welfare spending in the USA has two components: the federal government spends money to directly provide social benefits to citizens, and also indirectly subsidizes the private provision of social benefits through tax expenditures. Though benefits provided through tax expenditures are considered spending for budgetary purposes, they differ from direct spending in several ways: in the mechanisms through which benefits are delivered to citizens, in how they distribute wealth across the income spectrum, and in the visibility of their policy consequences to the mass public. We develop and test a model explaining how these differences will affect public attitudes toward spending conducted through direct and indirect means. We find that support for otherwise identical social programs is generally higher when such programs are portrayed as being delivered through tax expenditures than when they are portrayed as being delivered by direct spending. In addition, support for tax expenditure programs which redistribute wealth upward drops when citizens are provided information about the redistributive effects. Both of these results are conditioned by partisanship, with the opinions of Republicans more sensitive to the mechanism through which benefits are delivered, and the opinions of Democrats more sensitive to information about their redistributive effects.

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Notes

  1. Budget experts argue that targeted tax breaks of this sort should be considered “expenditures” since this policy tool shares many characteristics of direct spending: targeting money to specific populations or activities, and having an economic effect on beneficiaries, the market, and the budget (Howard 1997; Burman, Geissler, and Toder 2008). Formally, tax expenditures are counted as revenue losses to the US Treasury, and allow for the side-by-side comparison of programs funded through the tax code and those funded through the appropriations process (Surrey 1974). While some social tax expenditures are used to make public social benefits such as Social Security tax free; the vast majority of these programs are used to subsidize the private sector.

  2. For example, if a worker in the 35 % bracket is allowed to exclude $10,000 from her income as part of a tax deduction program, she receives a tax expenditure of $3,500. If a similar worker in the 15 % bracket is allowed to exclude the same $10,000 from her income, her tax break is only $1,500. Additionally, wealthier households are more likely to both itemize their taxes (thus claiming tax deductions) and to be enrolled in employment-based social programs.

  3. For example, Page and Jacobs (2009) show that a majority of Republicans support federal involvement in “spending whatever is necessary to ensure that all children have really good public schools.” Additionally, Ellis and Stimson (2012) find that a substantial majority of self-identified Conservatives advocate more government spending on a variety of social programs and services.

  4. An additional hypothesis, then, might suggest that priming respondents with information about the redistributive effects of downward-distributing programs might increase support for such programs. This makes sense, but it is important to note that most Americans view ‘government spending’ as almost by definition downward-redistributing (Jacoby 1994; Stimson 2004), so providing this information would not, on balance, provide respondents additional information on which to evaluate the program.

  5. The work of Haselswerdt and Bartels (2011), which finds that citizens are less supportive of a program to help people buy homes when it is framed as a “government grant” as opposed to a “tax savings,” reinforces the notion that framing matters to support on programs such as this.

  6. To get a basic sense of how our respondents compared to the population at large, we included on our survey several politics-related questions that mirror those on the 2008 American National Election Study. As an example, 64 % of our respondents agreed that “A big problem in this country is that we don’t give everyone an equal chance,” while 58 % of respondents in the 2008 American National Election Study agreed with this statement. Forty-four percent of our respondents, and 37 % of NES respondents, agree that the reason government has gotten bigger is because “because it has gotten involved in things that people should do for themselves” (as opposed to because “the problems we face have become bigger”). A fuller description of the demographic and attitudinal characteristics of our sample is available upon request.

  7. There are two concerns regarding the use of a student sample for this experiment that are particularly relevant. The first is that since most students have not obtained mortgages or saved for retirement themselves, they might have less familiarity with these programs than older citizens, and thus might be more susceptible to framing effects on these issues. While this would not affect the direction of framing effects relative to the general population, it might exaggerate their magnitude. This is a concern to some extent, though it is mitigated by Mettler’s (2011) finding that even beneficiaries of tax expenditure programs like the mortgage interest deduction are often unaware of their existence or function. Second, it is possible that students—because of their low levels of political interest, engagement, or experience—will have less stability in their political attitudes, and thus be more susceptible to framing effects in general. As a basic check on this, we asked students to report their levels of political interest using questions identical to those on the National Election Study, and find that our sample reports levels of interest and engagement comparable to those reported by respondents in population at large. In addition, we have replicated the results stratifying students by levels of interest, and see similar effects across high- and low-engagement groups. This partially helps to mitigate the concern that the results are driven primarily by low levels of ‘attitude crystallization’ among students (see also Kam 2005).

  8. This small battery of predictors does a substantially better job of predicting attitudes toward the food stamp issue than either of the other two issues, suggesting that respondents are better able to view the food stamp issue in the context of existing beliefs than they are with the other two programs. In particular, the coefficient for the ‘deservingness’ variable is substantially greater for the food stamp issue than for the other two issues. One possible interpretation for this, consistent with the work of Gilens (1999), Iyengar (1990), and others who study public attitudes toward poverty-relief, is that citizens have clear (if often inaccurate) visions of to what the recipients of government assistance programs of this sort “look like,” and are able to couch their opinions more directly in beliefs of government’s proper role in providing assistance to such citizens.

  9. These results reinforce the work of Mettler (2011), who is also interested in role that informing citizens about the distributive effects of social tax expenditures affects public support for them: her study finds that providing information about the distributive effects of upward-redistributing programs. Mettler finds that informing respondents detailed information about the inequality-producing effects of certain types of social tax expenditures (e.g., “70 % of the total tax benefits of the mortgage interest deduction goes to homeowners earning $100,000 per year or more in household income”) tends to decrease public support for them. Our frame is much more subtle: the information presented to respondents here talks more generally about the social groups to which policy benefits will accrue. The significant results suggest that extensive priming of inequality is not necessary to produce changes in the distribution of opinion on upward-redistributing policy: even a nod in the direction of redistributing benefits to people generally considered to be well-off (e.g., ‘owners of expensive homes’) is enough to shift opinions.

  10. We had no specific expectations for Independents, but we note that Independents were less responsive to both sets of frames for all issues than were partisans. This is a bit counterintuitive (given that Independents are generally considered to hold preferences that are more transient and susceptible to persuasion than partisans). But it is also possible that Independents do not have strong core beliefs (i.e., toward the role of government or toward income inequality) that would make the changes in frames meaningful. In any event, this is a fruitful subject for future research.

  11. Even though levels of support drop more strongly for Democrats when redistributive effects are mentioned, the mention of these effects does not necessarily make Democrats like these programs less than Republicans do. For the mortgage interest and retirement programs, there are no significant differences in between Republican and Democratic support in the ‘redistributive effects’ conditions (though there are differences, with Democrats more supportive than Republicans, in the ‘no redistributive effects’ conditions). We have no ready explanation for why this is the case, though it may be in part because regardless of which frame was chosen, the programs were introduced as “policy proposals designed to assist individuals…,” which primes the idea of government intervention in the economy in a way that Democrats tend to tolerate while Republicans do not.

  12. Given these motivations, it seems as if proposals that would be most likely to draw public support would be those that both spend money through the tax code rather than directly, and also are framed as not redistributing wealth upward such as refundable tax credits. One such strategy along these lines was alluded to by President Obama in a 2011 speech: “the tax code is also loaded up with spending on things like itemized deductions. And while I agree with the goals of many of these deductions, from homeownership to charitable giving, we can’t ignore the fact that they provide millionaires an average tax break of $75,000 but do nothing for the typical middle-class family that doesn’t itemize. So my budget calls for limiting itemized deductions for the wealthiest 2 % of Americans—a reform that would reduce the deficit by $320 billion over 10 years” (Obama 2011). The fact that Mitt Romney—some months later—endorsed a plan that would also cap tax deductions for wealthy citizens suggests that such a plan was perceived as quite popular, at least among some important constituencies.

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Acknowledgments

The authors wish to thank Bill Jacoby and Matthew Dabros for helpful comments on this project.

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Correspondence to Christopher Ellis.

Appendix: Question Wording for Retirement and Food Stamp Questions

Appendix: Question Wording for Retirement and Food Stamp Questions

Retirement

Tax Expenditure Some have endorsed a program that would assist individuals in saving for retirement while still paying day-to-day bills. Under this plan, individuals who invest money in a private retirement plan would be able to deduct the amount that they save for retirement from their taxable income. This tax deduction would reduce the amount of taxes that workers must pay to the federal government. The total cost of this program is expected to be roughly $115 billion per year.

Direct Spending Some have endorsed a program that would assist individuals in saving for retirement while still paying day-to-day bills. Under this plan, individuals who earn invest money in a private retirement plan would be eligible for government payments that would help to offset the amount of money that they save for retirement. The total cost of this program is expected to be roughly $115 billion per year.

Tax Expenditure, Redistributive Some have endorsed a program that would assist individuals in saving for retirement while still paying day-to-day bills. Under this plan, individuals who invest money in a private retirement plan would be able to deduct the amount that they save for retirement from their taxable income. This tax deduction would reduce the amount of taxes that workers must pay to the federal government. These tax deductions would go to those who save for retirement, with the largest payments going to those who save the most money for retirement. The total cost of this program is expected to be roughly $115 billion per year.

Direct Spending, Redistributive Some have endorsed a program that would assist individuals in saving for retirement while still paying day-to-day bills. Under this plan, individuals who earn invest money in a private retirement plan would be eligible for government payments that would help to offset the amount of money that they save for retirement. These government payments would go to those who save for retirement, with the largest payments going to those who save the most money for retirement. The total cost of this program is expected to be roughly $115 billion per year.

Food Stamps

Tax Expenditure Some have endorsed a program that would provide low-income citizens with assistance in paying for groceries and other necessities. Under this program, citizens would be eligible to deduct the amount of money that they pay for groceries from their taxable income. These tax credits would reduce the amount of federal income tax that these citizens pay each year. The total cost of this program is expected to be $65 billion per year.

Direct Spending Next, some have endorsed a program that would provide low-income citizens with assistance in paying for groceries and other necessities. Under this program, certain citizens would be eligible for cash grants from the federal government that can be used to purchase groceries. The total cost of this program is expected to be $65 billion per year.

Tax Expenditure, Redistributive Next, some have endorsed a program that would provide low-income citizens with assistance in paying for groceries and other necessities. Under this program, citizens would be eligible to deduct the amount of money that they pay for groceries from their taxable income. These tax credits would reduce the amount of federal income tax that these citizens pay each year. Since the program is designed to help those who struggle to pay for basic necessities, the largest tax credits would go to those with the lowest incomes. The total cost of this program is expected to be $65 billion per year.

Direct Spending, Redistributive Next, some have endorsed a program that would provide low-income citizens with assistance in paying for groceries and other necessities. Under this program, certain citizens would be eligible for cash grants from the federal government that can be used to purchase groceries. Since the program is designed to help those who struggle to pay for basic necessities, the largest tax credits would go to those with very low or no incomes. The total cost of this program is expected to be $65 billion per year.

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Faricy, C., Ellis, C. Public Attitudes Toward Social Spending in the United States: The Differences Between Direct Spending and Tax Expenditures. Polit Behav 36, 53–76 (2014). https://doi.org/10.1007/s11109-013-9225-5

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Keywords

  • Government spending
  • Social policy
  • Social welfare
  • Public opinion