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Matched dollar incentives for saving tax refunds

Health Factors: Income
Decision Makers: Local Government State Government Federal Government Nonprofit Leaders
Evidence Rating: Some Evidence
Population Reach: 50-99% of WI's population
Impact on Disparities: Likely to decrease disparities

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Description

Various programs provide matched dollar incentives for individuals to place some or all of their tax refund in a savings account. These programs, usually focused on low and moderate income individuals and families, offer matching deposits up to 100% of the amount saved from tax refunds. Most programs require a minimum amount placed in savings and a minimum time period before a deposit can be withdrawn in order to receive the matching funds. Matches can be provided by government entities or nonprofit agencies.

Expected Beneficial Outcomes

Increased asset accumulation
Increased financial stability

Evidence of Effectiveness

There is some evidence that programs that encourage low and moderate income individuals and families to save tax refunds increase asset accumulation in the form of savings (Tucker 2014, MDRC-Azurdia 2014, Key 2013). Additional evidence is needed to confirm effects.

Initial assessments of matched savings programs SaveUSA and $aveNYC, both intended for low and moderate income taxpayers and implemented at Volunteer Income Tax Assistance (VITA) sites, showed greater savings among participants than non-participants. A majority of participants kept deposits in specially designated accounts for at least one year, receiving a 50% dollar match for the pledged amount (Tucker 2014, MDRC-Azurdia 2014, Key 2013).

Specific effects varied from program to program and between tax years. In the first year of both programs, participants had more short-term (non-retirement) savings six months after receiving match dollars than non-participants (MDRC-Azurdia 2014, Key 2013). Gains among $aveNYC participants were concentrated among childless participants in the first year of the program (Key 2013). Participants in the second year of the $aveNYC program were less likely to have taken out loans or skipped bill payments, and more likely to have withdrawn money from savings, than non-participants. However, there was no difference in savings amounts six months after receiving the program match in the second year of $aveNYC (Tucker 2014).

A study of the first year of $aveNYC suggests that financial hardship and limited understanding of program requirements can increase the likelihood that participants close accounts early, withdrawing their money before receiving matched funds (Manturuk 2012).

Implementation

United States

$aveNYC ran at several VITA sites in New York City in 2009 and 2010. Participants who direct deposited a minimum amount of their refund ($100 in 2009, $200 in 2010) into a designated savings accounts and maintained their balance for a year received 50 cents per dollar saved (up to $250 in 2009, $500 in 2010) (Tucker 2014, Key 2013). SaveUSA, based on the $aveNYC model, was piloted in New York City, Tulsa, San Antonio, and Newark from 2011-2013 (MDRC-Azurdia 2014), and was replicated in Houston, TX (NYC CEO-SaveUSA). 

Implementation Resources

NYC SaveUSA - New York City. SaveUSA Program. Accessed on October 13, 2015

Citations - Evidence

Key 2013 - Key CC, Grinstein-Weiss M, Tucker JN, Holub K. Savings at tax time: The effect of $aveNYC on savings in low-income households. Chapel Hill: UNC Center for Community Capital, University of North Carolina College of Arts & Sciences; 2013. Accessed on March 9, 2016
Manturuk 2012* - Manturuk K, Dorrance J, Riley S. Factors affecting completion of a matched savings program: Impacts of time preference, discount rate, and financial hardship. The Journal of Socio-Economics. 2012;41(6):836-842. Accessed on March 9, 2016
MDRC-Azurdia 2014 - Azurdia G, Freedman S, Hamilton G, Schultz C. Encouraging savings for low- and moderate-income individuals: Preliminary implementation findings from the SaveUSA evaluation. New York: Manpower Demonstration Research Corporation (MDRC); 2014. Accessed on March 9, 2016
Tucker 2014* - Tucker JN, Key CC, Grinstein-Weiss M. The benefits of saving at tax time: Evidence from the $aveNYC evaluation. The Journal of Socio-Economics. 2014;48:50-61. Accessed on March 9, 2016

Citations - Implementation

Key 2013 - Key CC, Grinstein-Weiss M, Tucker JN, Holub K. Savings at tax time: The effect of $aveNYC on savings in low-income households. Chapel Hill: UNC Center for Community Capital, University of North Carolina College of Arts & Sciences; 2013. Accessed on March 9, 2016
MDRC-Azurdia 2014 - Azurdia G, Freedman S, Hamilton G, Schultz C. Encouraging savings for low- and moderate-income individuals: Preliminary implementation findings from the SaveUSA evaluation. New York: Manpower Demonstration Research Corporation (MDRC); 2014. Accessed on March 9, 2016
NYC CEO-SaveUSA - New York City Center for Economic Opportunity. SaveUSA. Accessed on March 9, 2016
Tucker 2014* - Tucker JN, Key CC, Grinstein-Weiss M. The benefits of saving at tax time: Evidence from the $aveNYC evaluation. The Journal of Socio-Economics. 2014;48:50-61. Accessed on March 9, 2016

Page Last Updated

October 20, 2015

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