The Impact of Tax Refund Delays on the Experience of Hardship and Unsecured Debt

The Earned Income Tax Credit (EITC) provides substantial financial support to low-income workers, yet around a quarter of EITC payments are estimated to be erroneous or fraudulent. Beginning in 2017, the Protecting Americans from Tax Hikes Act of 2015 requires the Internal Revenue Service to spend additional time processing early EITC claims, delaying the issuance of tax refunds. Leveraging unique data, we investigate how delayed tax refunds affected the experience of hardship and unsecured debt among EITC recipients. We find that early filers experienced increased food insecurity relative to later filers after the implementation of the refund delay

Disparate financial assistance support for small business owners

Small business owners experienced a drastic economic disruption caused by the COVID-19 pandemic. Government pandemic assistance failed to reach many small business owners, especially those historically underserved by financial institutions. Drawing on a 2021 survey of 246 small business owners, the Social Policy Institute at Washington University in St. Louis descriptively examined the extent to which small business owners sought and received business assistance, and whether applications and approval of government assistance varied by race and ethnicity. We find that though Hispanic and Black business owners applied for government assistance at a higher rate than white business owners, Black business owners were significantly less likely to be granted assistance. For example, 67% of Hispanic and 44% of Black business owners applied for Paycheck Protection Program (PPP) loans compared with 39% of their white counterparts. Only 59% of Black business owners were approved compared with 100% of all others. 43% of Black business owners received a Shuttered Venue Operators Grant (SVOG) compared with 64% of white business owners and 100% of all others. 25% of Black business owners were approved for a delay in payroll tax compared with 75% of white business owners and 100% of all others. Thus, while government assistance programs are crucial for the survival of many businesses during the COVID-19 pandemic, our descriptive analysis shows that these programs are significantly less likely to reach Black business owners

Paid sick leave heading into COVID-19: A descriptive account of workers who lacked paid sick leave

Paid sick leave is vital for controlling the spread of illness in the workplace and an invaluable public health tool, but too few workers have access to it. In this brief, we examine the beginning of the COVID-19 pandemic to assess paid sick leave coverage with a focus on the social and economic characteristics of workers without paid leave. Using a nationally representative survey with roughly 4,000 working respondents, we found that a third lacked access to paid sick leave. Workers without paid leave were younger, more likely to be female, more likely to be white, and less likely to have a college degree. More workers without paid leave had smaller employers, meaning employers with fewer than 50 employees. Workers in care- and service-based industries had less access to paid leave. Part-time employees and those paid hourly rather than salaried were also less likely to have paid leave. Workers without paid sick leave experienced greater financial challenges, had lower household incomes and had net worth. They also reported lower self-rated financial wellbeing and were less likely to have emergency savings to cope with sudden income drops. In March of 2020 the federal government implemented two weeks of paid sick leave via the Families First Coronavirus Response Act (FF-CRA), but the policy only encompasses businesses with 50 to 500 workers, leaving out many workers, particularly those most likely to lack paid sick leave to begin with. Enacting a universal paid sick leave policy would likely lessen economic strain for working families, reduce existing economic inequalities across social groups, and improve overall public health

Do EITC Recipients Use Their Tax Refunds to Get Ahead? Evidence From the Refund to Savings Initiative

Many U.S. households lack savings for unexpected expenses and financial shocks, but tax refunds and the Earned Income Tax Credit offer opportunities to set aside resources for use in emergencies. Understanding what EITC recipients do with their tax refunds is important for guiding federal policy to promote financial stability. This brief summarizes findings on the use of tax refunds by EITC recipients in the Refund to Savings (R2S) initiative. It also examines the use of financial services for saving refunds and the financial shocks experienced by EITC recipients during the 6 months after tax filing

Nothing to Show for It: Non-Degreed Debt and the Financial Circumstances Associated with It

The number of individuals with student loan debt who do not earn their degrees is on the rise; nevertheless, there is little research that demonstrates the financial conditions and circumstances of these individuals. We address this knowledge gap by comparing the financial outcomes of student debt-holders who started college but did not earn a degree—those with non-degreed debt (NDD)—with similar individuals who did not attend college and did not take on student debt. We find that individuals with NDD had greater odds of experiencing material and healthcare hardships, as well as financial difficulties. Individuals with NDD also had greater financial anxiety and lower levels of financial well-being. Despite these challenges, individuals with NDD were more optimistic than high school graduates concerning future college enrollment and earnings. We discuss the implications of these findings with regards to financial aid policies, debt repayment policies, and college retention and re-enrollment efforts

Does Banking Experience Matter: Differences of the Banked and Unbanked in Individual Development Accounts

Using data from the 4-year American Dream Demonstration, this study compared saving performance and program participation of banked participants (n = 1,538) with unbanked participants (n = 466) enrolled in 14 IDA programs across the United States. The study found that unbanked participants had $3.26 lower average monthly net deposit (p\u3c.05) and 5% lower deposit frequency (p\u3c.001) than banked participants. Unbanked participants had 45% greater odds of dropout than banked participants (p\u3c.001). Further analyses looking at the intervening variables suggested that the combined effects of car ownership, education, race, and monthly savings targets significantly reduced the savings gap between the two groups

The Burden of Student Debt: Findings From a Survey of Low- and Moderate-Income Households

Completing a college degree continues to offer a pathway for enjoying greater earnings. Yet tuition has risen sharply and state higher-education funding has declined in recent years, shifting the burden of paying for college to students and their families. As a result, most students (70%) depend on loans to help pay for college and student debt is now greater than credit card debt in the United States. Student debt is increasingly difficult to manage, as debt-to-income ratios, loan default rates, and delinquency rates are on the rise. This brief utilizes data from the 2014 Refund to Savings study to examine the experiences of low- and moderate-income (LMI) tax filers with student debt. The findings show that over half (51%) of the sample (N = 8,772) had student debt. Borrowers owed $35,482, on average, and were more likely than nonborrowers to experience financial difficulties, such as overdrawing bank accounts, and hardships, such as skipping a housing payment. Compared with borrowers from other racial/ethnic groups, Black borrowers were more likely to experience difficulty repaying their student loans. Policies should aim to decrease the proportion of college costs that is financed by student loans, provide additional support to students from LMI households, and address racial disparities in education

Financial Well-Being in Low- and Moderate-Income Households: How Does It Compare to the General Population?

Research has increasingly shed light on the precariousness of many households’ financial situations. For example, a large national survey showed that 41 percent of adults lack sufficient liquidity to cover even a modest $400 emergency without taking on debt or selling an asset;1 a problem that is exacerbated for lower-income households.2 Compounding this issue is the fact that financial shocks, such as the loss of income or a major car repair, are common; 60 percent of U.S. households reported a shock in the prior year at a median cost of$2,000.

Financial Well-Being in Low- and Moderate-Income Households: How Does It Compare to the General Population?

Research Brief (18-03) Research has increasingly shed light on the precariousness of many households’ financial situations. For example, a large national survey showed that 41 percent of adults lack sufficient liquidity to cover even a modest $400 emergency without taking on debt or selling an asset; a problem that is exacerbated for lower-income households. Compounding this issue is the fact that financial shocks, such as the loss of income or a major car repair, are common; 60 percent of U.S. households reported a shock in the prior year at a median cost of$2,000. We would expect that these indicators of financial insecurity would translate into feelings of discomfort and anxiety about finances. Yet the research on the degree to which Americans feel financially insecure is mixed. On the one hand, 74 percent of U.S. adults said that they lead relatively comfortable financial lives. On the other hand, financial issues are consistently the largest reported source of stress for U.S. households. These findings point to a complex interaction between objective and subjective measures of financial security and suggest a need for more comprehensive and rigorous methods to assess the financial well-being of U.S. households