+1 for this pattern when it works. Be aware that there is no single policy that's universally applicable. Even with the same person, there can be different situations where a declined offer is going to sting regardless of how it's phrased. Compassion demands that you do so with the minimum of pain. Rationality (usually) demands that you do so with the maximum potential for future interactions. These are mostly in agreement: communicate using whatever conventions make the other person most comfortable.

For some, you can gently lead them down the path of direct, simple statements of preference. But for a lot of people, that causes more pain than help.

I've long been a fan of (and participant in) Crocker's Rules for social interaction, but I'm well aware that it doesn't work among people who don't already feel pretty comfortable with the idea, or who don't feel emotionally safe in the interaction.

edit: fixed link