A voting tax credit

Summary

Background. Congress is considering voting rights legislation, but Senate passage is impossible unless the filibuster is eliminated, and that would be difficult in the near term. Legislation in several Republican-dominated states is making it more difficult to vote.

A voting tax credit can motivate voters. Voter turnout can be increased by making it easier to vote. A complementary approach is to motivate voters. Economics would tell us that one way of motivating people is to offer incentives, and compensate people for their effort. A modest tax credit for voting could make the difference for those on the fence about voting, especially for those lower down the income scale.

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). A voting tax credit wouldn’t increase the deficit, as long as tax adjustments are made to offset the cost. On its own, a refundable tax credit is progressive; the overall effect on progressivity would depend on what tax offsets are used.

Voting tax credit in a nutshell. Everyone voting in a Federal election would receive a refundable $200 tax credit. There could be various ways to claim 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. Taxpayers unable to vote through no fault of their own would be allowed to claim the credit.

Turnout in 2020 was high but needs substantial improvement

Turnout for the 2020 election was at historically high levels, at about 66 percent of the voting-eligible population. While this high turnout is an improvement on the past, considering that even with historically high turnout, about 1 in 3 eligible voters did not vote, then this does not look so good for democracy.

A voting tax credit is an appropriate incentive for voting

A good way of incentivizing people to vote is the way that we incentivize 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, don’t manage to vote, or who are not eligible to vote (such as noncitizens). 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. Estimating the time as being about one day, a $200 credit comes out to about $25 per hour, which is around the average wage. This amount should motivate even more strongly lower-wage individuals, which is the population to be targeted, since their turnout is much lower than the highly paid. At the same time, it would not be catastrophic for someone to lose out on a $200 credit. Voting would still be a matter of choice.

A voting tax credit addresses the free rider problem with voting. The “free rider” problem applies when 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, given that voting involves time and possibly expense. 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.

It is likely that a $200 tax credit would be fairly effective in motivating people to vote. Of course it will not motivate everyone, but it is likely to increase turnout substantially.

The credit is intended to compensate voters for the time associated with voting, which includes studying the issues, 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.

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 very 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 Republicans get away with enacting 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

A voting tax credit can be seen as 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. Grandfather clauses exempted many White voters from payment of the tax. 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, it helps to achieve racial justice because turnout among those groups that have historically not been politically dominant tends to be lower. Many feel (correctly) that their voices have not been heard and that their political participation has not given them political power, and don’t bother to vote for that reason. A voting tax credit would offset this feeling of powerlessness.

Structuring the credit

The credit would be $200 for each time a voter votes in a Federal election.

a. Primaries. 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 can 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, there would be no obstacle to people voting in primaries, and 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 might become more 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 usual, and the credit would encourage turnout. True, allowing the credit would provide an advantage to voters in such elections, 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, especially since the credit is set at an amount designed to compensate voters for their time.

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 Alzheimers 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 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. Whether a perticular person voted is already public information. States can report the numbers to the IRS for verification and matching to returns.

Draft legislative language

The following section is 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 Jan. 1, 2025, 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.

(e) Application of credit

The credit allowed under this section shall apply to taxable years beginning on or after Jan. 1, 2024.