Leveraging Tax Time to Build Financial Capability: Research Evidence and Policy Directions

Over the past decade, a variety of initiatives have been implemented in the United States to facilitate saving and build financial security at tax time, including national experiments, pilot programs, and federal and state policies. Much progress has been made in encouraging tax filers, especially low- to moderate-income (LMI) tax filers, to save a portion of their refund. To expand upon the “golden moment” of saving at tax time, policymakers, practitioners, and researchers must now seek ways in which the lump sum of saving at tax time can serve to render tax filers capable of confidently managing their financial lives. During the 2016 tax season, thought leaders from government, policy, practice, foundations, and academia reviewed the latest research findings and discussed future possibilities of using tax time to catalyze household financial capability. The goal of the symposium was to provide opportunities for discovery and discussion across disciplines about ways LMI households can contribute to their economic security before, during, and after they file their taxes

Support for a Tax-Time Savings Policy: Interest in Deferring Tax Refunds With Matched Incentives

Support for a Tax-Time Savings Policy: Interest in Deferring Tax Refunds With Matched Incentive

Frequently Asked Questions About the Features of Child Development Accounts in Israel

In November 2015, Israel enacted legislation to create and fund a Child Development Account program. Beginning in 2017, every baby born to an insured Israeli resident will receive a Child Development Account in his or her name. This Fact Sheet provides answers to frequently asked questions about the policy, which was developed in collaboration with researchers at the Center for Social Development

Health Literacy and Patient Reported Outcomes in Orthopaedic Surgery Patients

Background: Health literacy may be an important factor in patient health outcomes, however, prior research has primarily focused on primary care patients with research in orthopaedic specific populations lacking. Questions/purposes: The purpose of this study was to examine the relationship between health literacy and patient reported outcomes in an orthopaedic patient population. Patients and Methods: 183 patients \u3e18 years of age who presented to our institution’s sports orthopaedic surgery clinic with shoulder or knee complaints were analyzed. The primary outcomes were physical function recorded using Patient-Reported Outcomes Measurement Information System (PROMIS) physical function and Single Assessment Numerical Evaluation (SANE) scores. Health literacy was determined utilizing Health LiTT, a self-administered multimedia touchscreen test based on item response theory that provides a numerical score of 0-100 with a score \u3e50 suggestive of health literacy. In addition, demographic data including age, race, gender, highest level of education, injury location, and surgery status were collected. Results: Bivariate analysis revealed that low health literacy (Health LiTT score Conclusions: Our data showed that PROMIS scores are less reliant on health literacy and more dependent on age, employment status, having surgery and low education level achieved. Adaptations to clinical practice may be necessary to better guide these select populations and improve patient-reported physical function. Furthermore, PROMIS measures can be administered successfully to patients regardless of health literacy. Level of Evidence: Level I

Characteristics and Hardships Associated With Bank Account Ownership Among Refund to Savings Participants

Having a bank account is one important way for households to securely accumulate savings, build credit, and earn interest on assets. Nationally, 7.7% of households are unbanked—lacking both a checking and a savings account. One proposed step toward financial inclusion is to encourage unbanked households to open accounts and deposit refunds into savings at tax time, when many low-income households receive the year’s largest lump sum of cash. This brief utilizes data from the 2013 Refund to Savings study to summarize differences between banked and unbanked households. The findings show that unbanked status is a marker for other financial disadvantages, including having more unsecured debt and fewer assets. However, many who were unbanked at the time of the first survey were banked by the 6-month follow-up survey. Also, about a third of unbanked households expressed interest in opening a new account at tax time. Policies and products should facilitate account opening and retention of low-income households in the banking system

Assessing Retirement Needs and Interest in myRa: Findings From the Refund to Savings Initiative

As part of the U.S. Department of the Treasury’s ongoing effort to promote the myRA starter retirement account, we used the Refund to Savings Initiative’s Household Financial Survey to assess low- to moderate-income tax filers’ retirement needs, attitudes towards retirement, and interest in a myRA-type account. We also tested different messaging approaches for promoting myRA. The report found that 32% of survey respondents did not own a retirement account and that lack of money and lack of access to an employer-based account were major impediments to retirement account ownership. The report also found that only 10% to 15% of respondents felt on track to retire comfortably. Several aspects of myRA appealed to respondents including the absence of a minimum balance and the absence of penalties for early withdrawal. Additionally, a simple, direct, informational approach to promotional messaging proved more effective than personal messaging at driving interest in myRA

Coping With a Crisis: Financial Resources Available to Low- and Moderate-Income Households in Emergencies

Using data from tax records and a longitudinal survey, this brief investigates the choices low- and moderate-income households make about their tax withholding and their preferences for withholding. The relationship between withholding preferences and the use of the tax refund, measures of material hardship, and the use of alternative financial services is also explored. We find that almost half of all survey respondents preferred to overwithhold their income each year in order to get a larger tax refund. Yet despite preferring to take home less income during the year, these households experienced higher levels of material hardship than those who preferred to break even in their withholding, and were more likely to use alternative financial services like payday lenders. Further, households that preferred to overwithhold were less likely to save their refund. We also find that respondents who preferred to break even on their withholding or underwithhold on their taxes still overwithheld a substantial amount of income, indicating that LMI households have difficulty withholding their preferred amounts. Implications of these findings for policy are discussed

The Role of Health Insurance in the Financial Lives of Low- and Moderate-Income Households

Health insurance is an important resource for enabling access to and use of medical care, and is associated with reduced risk for mortality and poor health outcomes. Health insurance also protects households from incurring major medical expenses and unmanageable levels of medical debt. About a quarter of a sample of low- and moderate-income (LMI) tax filers have no health insurance, compared to 10% of all individuals in the United States. As of 2014, the proportion of filers without insurance was 11 percentage points higher in states that had not expanded Medicaid through the Affordable Care Act (ACA) than it was in expansion states. Lack of insurance is associated with lower income and assets, and higher unsecured debt, as well as greater likelihood of experiencing financial difficulties and material hardship. Despite progress in expanding health insurance coverage under the ACA, additional efforts are needed, including effort to further expand Medicaid and high-risk insurance pools, strengthen charity care policies and practices, and forgive medical debt

The Role of Choice Architecture in Promoting Saving at Tax Time: Evidence From a Large-Scale Field Experiment

This paper presents the findings of a large-scale field experiment (N = 646,16) from the Refund to Savings Initiative. The experiment tested a choice architecture and persuasive messaging intervention that increased saving among low-moderate income (LMI) consumers by approximately 50% during tax refund time. Two follow-up experiments parsed components of the intervention. The first follow-up experiment (N = 569) tested the messaging and choice architecture interventions separately, finding that each can increase savings. a final follow-up experiment (N = 554) tested individual elements of the choice architecture intervention, demonstrating that mere mention of savings within choice options was not sufficient to increase saving, however, heavy emphasis of savings and making saving “frictionless” within choice options both effectively increased saving intentions. The final experiment also demonstrated that the choice architecture effect operates similarly for both LMI and non-LMI consumers

Effects of an Individual Development Account Program on Retirement Saving: Follow-Up Evidence From a Randomized Experiment

Effects of an Individual Development Account Program on Retirement Saving: Follow-Up Evidence From a Randomized Experimen