Incentives Work
The U.S. congress is engaged in a conflict over voting rights legislation. How this bill gets through Congress is one problem, but how it finds its way to voters’ hearts may be easy: money.
The voting rights legislation currently under congressional consideration does not include a tax credit for voting. That is an important omission. Offering a tax credit to those who vote might be one of the most effective ways to increase voter turnout.
Background
Following the 2020 U.S. national election, legislation was enacted in several Republican-dominated states that will make it more difficult to vote. Republicans argue that this legislation is improperly labelled “Jim Crow” because it doesn’t make it impossible for Blacks to vote. But that is irrelevant. By putting up obstacles to voting, the new laws tend to discourage voters.
The Republican strategy is that Democrats will be discouraged from voting, thereby ensuring that Republicans win. With narrow margins in swing states like Georgia, North Carolina, Florida, Wisconsin, Arizona, and Pennsylvania, this strategy has a good chance of succeeding. (Pennsylvania has not enacted any changes to the voting rules as of yet; there is a Democratic governor who has threatened to veto any new rules that make it more difficult to vote.)
The voting rights legislation being considered in Congress goes beyond measures that make it easier to vote; for example, redistricting and election administration. However, a number of its provisions do concern how easy it is to vote. It is these provisions that are the focus of this article.
Motivating Voters with a Voting Tax Credit
Voter turnout can be increased by making it easier to vote. For example, rules can be enacted to make it easier to get an absentee ballot or to return that ballot (by using a drop box or mailing the ballot under rules that provide sufficient time for the ballot to be processed by the post office). An alternative approach is to offer incentives that would compensate for the effort, which economics tells us is one way of motivating people. A modest tax credit for voting could make the difference, especially for those lower down the income scale. Of course, take-up will not be 100% but nevertheless we could expect that if a tax credit for voting is offered, a substantial number of people who currently do not vote will vote.
Everyone voting in a federal election would receive a refundable $200 tax credit.
The approach of motivating voters can be complementary to enacting rules that make it easier to vote. It can also be an alternative to enacting such rules, if enactment of rules making it easier to vote is blocked for whatever reason.
Fitting the Voting Tax Credit into Reconciliation
A refundable tax credit for voting could be included in reconciliation legislation. The fiscal cost of the credit could be paid for by making other adjustments (to the personal exemptions and rate schedule). Because tax provisions can be netted out, a voting tax credit wouldn’t even increase the size of the bill, although it would require tax adjustments to make up for the cost. A refundable tax credit is progressive, so it would contribute to the progressivity of the tax system. The Build Back Better (BBB) legislation could, in principle, be amended to include a voting tax credit, but the reality is that it is going to be an uphill struggle to get any version of BBB enacted, and it is difficult to include new provisions at this late date. If there is another reconciliation bill after BBB, then a voting tax credit could be included there. A voting tax credit could also be enacted outside of reconciliation, but this seems unlikely since it would need the support of ten Republican Senators.
A credit should fairly compensate the average voter for time spent getting familiar with the candidates and issues, and time spent in the voting process itself.
How Would It Work?
Everyone voting in a federal election would receive a refundable $200 tax credit. There could be various ways specified to get the credit, but whoever does not claim it in advance can claim it on their income tax return. As with other deductions and credits, proof would be required to prevent fraud. State tax officials could issue a receipt number for everyone voting. There would be a mechanism for taxpayers unable to vote through no fault of their own to claim the credit.
Why Do We Need This?
Turnout for the 2020 election was at historically high levels, at about 66% of the voting-eligible population. While this high turnout is an improvement on the past, if you consider that even with historically high turnout, about one in three eligible voters did not vote, then this does not look so good for democracy.
Do We Really Want More People to Vote?
People who do not vote may not have a lot of information about how the political system works. Do we really want them to vote? The answer to this is, yes, because having virtually everyone in society vote is the only way that political decisions will reflect what society as a whole wants. It may take some time to get there—those who currently do not vote will need to educate themselves, but that is a good thing. They may vote on limited information, but I think we need to trust that over time that if there are more voters, those who are interested in advancing various policies will figure out how to communicate to the new voters.
Could We Make Voting Mandatory?
Some have argued that voting should be made mandatory, but this seems unrealistic for the United States. As we have seen with vaccines for coronavirus as well as requirements to sign up for health insurance, many Americans fiercely resist being told what to do. There would be substantial pushback on a rule requiring people to vote. A modest voting tax credit uses honey rather than a stick—it offers an incentive that lets individuals decide what to do. That seems much more acceptable than a requirement.
An Appropriate Incentive for Voting
A good way of incentivizing people to vote is the way that we encourage many things — through a tax credit. I suggest a refundable Federal income tax credit of $200 for each person voting in a federal election. The amount of the credit is intended to be substantial enough to motivate people. At the same time, the credit should not be too high, since setting the credit at too high a level would be punitive for those who don’t want to vote, who don’t manage to vote, or who are not eligible to vote (such as non-citizens).
The credit should be set at a level that fairly compensates the average voter for the time spent familiarizing themselves with the candidates and issues, and the time spent in the voting process itself. Taking an estimate of the time as being about one day, a $200 credit comes out to about $25 per hour, which is around the average wage. This should be an amount that would motivate even more strongly lower-wage individuals, which is the population to be targeted, since their turnout is much lower than the highly paid. (If time spent in educating oneself about the political system is taken into account, then it will take much more than one day.) At the same time, it would not be catastrophic for someone to lose out on a $200 credit should they not vote. Therefore voting would still be a matter of choice.
A voting tax credit also addresses the free rider problem with voting. The “free rider” problem applies whenever individual action benefits society but those benefits are not internalized. There is a free rider problem with vaccines, for example, in that an unvaccinated individual can depend on high community-level vaccination by others and thereby forego getting a vaccine themselves. While a large group of people getting vaccines can stop a disease and thereby confer a benefit on society, at the margin, one individual’s action will not be decisive. For voting, unless the election is anticipated to be extremely close, it is economically “rational” for a given individual not to vote, on the assumption that others will vote. A voting tax credit internalizes the externality involved in voting, by providing a tangible economic benefit that reflects the social benefit that an individual provides by voting.
A “free rider” problem applies whenever individual action benefits society but those benefits are not internalized.
It is likely that a $200 tax credit would be fairly popular, as well as being effective in motivating people to vote. Of course it will not motivate everyone, but it should increase turnout substantially.
A counterargument is that the incentive does make people jump through hoops to get this credit, but the answer is that the credit is intended to compensate voters for the time associated with voting, which includes studying the issues and candidates, getting to the polls or arranging to receive an absentee ballot, as well as the time spent filling out the ballot. It is not unreasonable to compensate people for this effort spent, especially if new legislation is making it more difficult to vote in several states, thereby requiring more effort from voters. For example, in Georgia, new legislation restricts drop boxes for absentee ballots. A voter not having a drop box nearby could instead take their ballot to the post office and pay for express delivery to make sure that the ballot is received in time. The tax credit can be seen as a compensation for this extra expense, as well as dealing with the free rider problem associated with voting.
Voter Suppression Measures
A voting tax credit would make it politically more difficult to enact voter suppression measures. Not only would the prospect of a $200 tax credit motivate people to vote, but it would make unpopular any measures that make it more difficult to vote, because those measures threaten to take away the credit or make it more difficult to get. Part of the reason that legislators can enact voter suppression techniques is that popular resistance is not strong. If people stood to lose $200 if unable to vote, it would likely become more difficult for voter suppression techniques to be enacted.
Opposite of a Poll Tax
One way of characterizing a voting tax credit is that it is the opposite of a poll tax. Poll taxes were used in many Southern states to disenfranchise Black voters. Payment of the poll tax was a precondition to registering to vote, but a “grandfather” clause exempted white voters from having to pay the tax if they had an ancestor who was eligible to vote before the Civil War. (The Supreme Court ruled the practice unconstitutional in 1966.) The poll tax was an obstacle to voting.
The voting tax credit achieves the opposite. Although a voting tax credit on its face is racially neutral, in fact it helps to achieve racial justice, since turnout among those groups that have historically not been politically dominant tends to be lower. Many feel (and history has borne out) that their voices have not been heard and that their political participation has not given them political power, leading to a lack of participation in the voting process. A voting tax credit would offset this feeling of powerlessness.
Fiscal Cost of the Credit
Seemingly, a $200 tax credit would be expensive. However, if this measure were folded into a more general tax reform bill (also urgently needed) the cost, in a sense, goes away because it can be offset by changes to the standard deduction, personal exemption, or rates.
A $200 tax credit is progressive, and so should not be objectionable. It would be close to a universal credit. Of course, the credit would be available to citizens only and therefore create a tax distinction between citizens and non-citizens, which currently does not exist. This is why the modest size of the credit is appropriate, as a very high credit would raise equity concerns because it is denied to non-citizens. Thinking of the credit as compensation for the time spent voting should alleviate these concerns.
Structuring the Credit
The credit would be $200 for each time a voter votes in a federal election.
a. Primaries. To limit costs, the credit would not be available for primaries. Given that many voters who are not registered in a major party are not eligible to vote in a primary, it would be unfair to extend the credit to primaries. Also, primaries could be seen as an internal Party matter and therefore of less importance than general elections. While primaries can in practice be more important than a general election in some cases, the availability of the credit should also increase primary voting, since more people would register to vote in order to take advantage of the credit, and would become interested in voting generally, including in primaries.
b. Special elections and run-offs. Special federal elections and run-offs are relatively rare. The credit should be allowed for voting in a special election or run-off, even more so because turnout in such elections is usually lower than average, and the credit would encourage turnout. True, allowing the credit in such elections would provide an advantage to those select voters, relative to other citizens who do not have occasion to vote in a special election, but the amount is small enough that it should not be considered unfair. If a voter happened to vote both in a special election and run-off in the same year, they should get a credit for each time voted, but this would be a rare situation.
c. Taxpayer unable to vote. Under regulations, the credit would be allowed for taxpayers who are unable to vote due to circumstances beyond their control or who made a good faith attempt to vote. An example would be someone with a disability who cannot vote (e.g., an Alzheimer’s sufferer) or someone who mailed in a ballot on time but the ballot was not received in time due to U.S. Postal Service delays. Another situation would be a taxpayer who lives in a state without same-day registration who moved close to the time of an election and did not have enough time to register or could not register by law.
d. Proof. State agencies should be able to provide proof of a voter voting. This would be a number available on the state elections department website, which the taxpayer could look up. For taxpayers without computer access, it should be relatively easy for each state to set up a phone number where a taxpayer could call to obtain the number automatically by entering the taxpayer’s name and birthdate. There should be no privacy concerns because having the number will not enable identity theft. States can report the numbers to the IRS for verification and matching to returns. For those concerned about voter fraud (for example, someone voting in two states), having this reporting by states would help identify and deter voter fraud. Voter fraud is not in fact a big problem, but for those who think it is, this may be one argument in favor of the credit.
Draft Legislative Language
The following section is to be added to the Internal Revenue Code:
36D. Refundable credit for voting.
(a) Allowance of credit
In the case of an individual who votes during a taxable year in a federal election, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to $200.
(b) Individual unable to vote
Under regulations prescribed by the Secretary, the credit allowed under subsection (a) shall be allowed to an individual who was unable to vote in a federal election held during the taxable year due to circumstances beyond the individual’s control.
(c) Proof required
Under regulations prescribed by the Secretary, a credit shall be allowed under this section only to an individual who provides proof of having voted or satisfying the requirements of subsection (b).
(d) Inflation adjustment
(1) In general
In the case of a taxable year beginning on or after January 1, 2023, the $200 amount in subsection (a) shall be increased by an amount equal to –
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins.
(2) Rounding
If any amount as adjusted under paragraph (1) is not a multiple of $10, such amount shall be rounded to the next lowest multiple of $10.
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins.
(e) Application of credit
The credit allowed under this section shall apply to taxable years beginning on or after January 1, 2022.
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Victor Thuronyi
