I view over-withholding as an interest free loan to the government. No thanks. I'd rather underpay by 1% than overpay. For me 1% is over $100/mo. I'd rather earn interest, dividends, whatever on that and then pay the balance.
On the other hand, it is likely a huge benefit to the poor and those who are poor at managing their money. Come tax time, they could easily face a bill that exceeds their paycheck and paying interest on top of their taxes. It would also cost the government more since they would have to pursue collection more aggressively.