Refund to Savings 2015-2016: Field Experiments to Promote Tax-Time Saving in Low- and Moderate-Income Households

The Impact of Tax Refund Delays on the Experience of Hardship Among Lower-Income Households

“…Lower-income households are more likely to experience these shocks (Acs et al, 2009;Chase et al, 2011), which cost an average of between $1,500 and $2,000 (Collins & Gjertson, 2013;Searle & Köppe, 2014) and consume a higher percentage of a lower-income household's budget relative to an equivalent shock in a higher-income household. Experiencing these shocks without an adequate savings or liquidity buffer may result in households experiencing an array of hardships such as housing instability, food insecurity, missing essential bill payments, or skipping necessary medical care (Despard et al, 2018;Heflin, 2016;Leete & Bania, 2010;McKernan et al, 2009;Roll et al, 2018). These hardships, in turn, can have substantial negative implications for downstream household outcomes including child developmental problems (Gershoff et al, 2007;Rauh et al, 2004), the experience of housing insecurity (Desmond & Kimbro, 2015), and mental and physical health issues (Heflin & Iceland, 2009;Palar et al, 2016;Sullivan et al, 2008;Whittle et al, 2015).…”

“…Tax refunds are especially important for lower-income tax filers because they often represent the single largest payment they will receive all year (Morduch & Schneider, 2017;Roll et al, 2018) and thus are an important source of consumption support. Lower-income households use refunds for many purposes: to build savings and pay down debt (Despard et al, 2015;Grinstein-Weiss et al, 2015;Mendenhall et al, 2012;Sykes et al, 2015), getting caught up on overdue bills, making home or car repairs, and making large purchases (Mendenhall et al, 2012;Morduch & Schneider, 2017;Shaefer et al, 2013;Sykes et al, 2015;Tach & Greene, 2014).…”