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Tax-Time Saving Among EITC Recipients: Results of a Large-Scale Experiment Informed by Behavioral Economics

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Date: November 8 – 10, 2018
Location: Washington Marriott Wardman Park | Washington, DC

Low- and moderate-income (LMI) households lack sufficient liquid assets to address unexpected emergencies and dips in income (McKernan, Ratcliffe, & Vinopal, 2009; Pew Charitable Trusts, 2015). Receiving tax refunds is an opportunity for recipients of the Earned Income Tax Credit (EITC) to build emergency savings to help cope with these financial shocks. However, prior research has shown that EITC recipients use their tax refunds for several purposes, such as reducing unsecured debt and making large purchases, and save only small portions of their refunds. The purpose of this study was to assess the effectiveness of savings messages among a large sample of EITC recipients who file their taxes online, and to assess the probability that EITC recipients would defer a portion of their refund for six months if offered savings bonuses like those in recent policy proposals (H.R. 4236, S.2797). We also determined whether these savings behaviors and preferences varied by the size of expected refunds.

Authors: Michal Grinstein-Weiss and Stephen Roll
Presenting author: Mathieu Despard