Since the mid-1990s, reductions in individuals’ tax bills, instead of benefits, have been used to benefit low-income groups in many advanced political economies. Little is known about the feedback effects of this change of instrument. Yet, using a tax cut instead of a benefit entails a different framing, and might affect the way in which beneficiaries and net contributors relate to the policy.
This article examines the change in social policy preferences induced by the introduction of the Working Tax Credit in the UK in 1998, and the Prime Pour l'Emploi in France in 2001. It exploits discontinuities in longitudinal data (from the British Social Attitudes survey and the French DREES Barometer) to analyse three types of potential feedback effects. First, do tax credits generate support among their own beneficiaries? Second, do beneficiaries support welfare spending in general? Third, does the transition to tax credits affects the willingness of beneficiaries and net contributors to pay taxes?
Preliminary results suggest that tax credits do not generate the positive feedback effects associated with traditional benefits, suggesting that such a change of instrument can be transformative in the long term as support for the welfare states wanes.
