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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

Several programs have piloted efforts to provide matched dollar incentives for individuals to place some or all of their tax refund in a savings account. These programs offer matching deposits up to 100% of the amount saved from tax refunds. Programs usually focus on low and moderate income individuals and families, require a minimum amount placed in savings, and a minimum time period before a deposit can be withdrawn in order to receive matching funds. Programs and matches are typically 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, such as SaveUSA and $aveNYC, increase savings amounts (MDRC-Azurdia 2016, Tucker 2014, Key 2015). Additional evidence is needed to confirm effects.

Assessments of SaveUSA and $aveNYC, matched savings programs for low and moderate income taxpayers implemented at Volunteer Income Tax Assistance (VITA) sites for several years around 2010, show greater savings among participants than non-participants. A majority of program 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 2015).

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 2015), and $aveNYC participants were more likely to have savings to cover one month of expenses than non-participating peers (Key 2015).  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year of the $aveNYC program were less likely to have taken out loans or skipped bill payments, and more likely to have withdrawn money from savings than non-participants.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). In the longer term, SaveUSA participants’ savings grew 30% more than non-participants (MDRC-Azurdia 2016).

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 and SaveUSA were two large pilot matching programs. $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 account and maintained their balance for a year received 50 cents per dollar saved (up to $250 in 2009, $500 in 2010) (Tucker 2014, Key 2015). 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

CFEF-SaveUSA - Cities for Financial Empowerment Fund (CFEF). SaveUSA. Accessed on June 20, 2017

Citations - Evidence

Key 2015* - Key C, Tucker JN, Grinstein-Weiss M, Comer K. Tax-time savings among low-income households in the $aveNYC program. The Journal of Consumer Affairs. 2015;49(3):489-518. Accessed on June 19, 2017
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 June 7, 2017
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 June 7, 2017
MDRC-Azurdia 2016 - Azurdia G, Freedman S. Encouraging nonretirement savings at tax time: Final impact findings from the SaveUSA evaluation. New York: Manpower Demonstration Research Corporation (MDRC); 2016. Accessed on June 19, 2017
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 June 7, 2017

Citations - Implementation

Key 2015* - Key C, Tucker JN, Grinstein-Weiss M, Comer K. Tax-time savings among low-income households in the $aveNYC program. The Journal of Consumer Affairs. 2015;49(3):489-518. Accessed on June 19, 2017
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 June 7, 2017
NYC CEO-SaveUSA - New York City Center for Economic Opportunity. SaveUSA. Accessed on June 7, 2017
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 June 7, 2017

Page Last Updated

June 19, 2017

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