Tax Time is the Time to Save

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Tax Time is the Time to Save Asset Funders
Network webinar November 12, 2009
David Marzahl, Executive Director
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• Mission
• The Center for Economic Progress helps
  hard-working, low-income families move from
  financial uncertainty to financial security.
• We provide trusted tax and financial counseling,
  giving Illinois families the tools to make sound
  choices.
• We lead a national coalition of organizations
  that promote economic progress for low-wage
  workers and their families.
• We advance policies and practices to create a
  financial system that works for all.

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Vision The Center for Economic Progress envisions
an America of shared prosperity, where all
working families can access the financial
opportunities they need to succeed.
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• What needs to change for our vision to become
  reality?
• Individual behaviors
• The marketplace
• Public policies

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2008 Filing Season
Source Internal Revenue Service, Tax Stats
Table 3.3 All Returns Tax Liability, Tax
Credits, and Tax Payments, by Size of Adjusted
Gross Income, Tax Year 2007. 1. Low-income
Adjusted gross income less than 25,000 2.
Moderate-income Adjusted gross income between
25,000 and 50,000
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Operating Framework
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Center for Economic Progress 2009 Results
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The National Community Tax Coalition (NCTC) is a
network of over 600 organizations, representing
the community-VITA field. Our mission is to
broaden the reach and impact of community-based
tax and financial services, while being a strong
voice in Washington, DC for low-wage workers and
low-income families.

• National Partners
• United Way of America
• National Disability Institute
• City of New York
• Internal Revenue Service
• VITA Programs
• Empire Justice Center, NY
• AccountAbility Minnesota, MN
• United Way of the Bay Area, CA
• City of San Antonio, TX

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Community Tax Preparation2009 Results

• 1.2 million returns prepared
• Tax refunds of 1.6 billion
• Average refund of 1,300
• Saved clients 220 million in return preparation
  costs
• Half of community tax preparation clients use
  direct deposit

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How do NCTC affiliates change behavior and move
the marketplace?
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Draw un-banked and under-banked clients into the
marketplace

• Direct deposit and split refunds
• Prepaid debit cards offered through bank partners
• Low-cost bank products available onsite
• Relationships with credit unions and banks

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Encourage clients to think about their finances

• Savings messages at tax time
• Alternative RALs1 and other short-term loans
• Credit counseling and credit reporting
• Financial coaching and financial education

1. RAL stands for refund anticipation loans,
which are one- to two-week loans secured by
taxpayers expected refunds.
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Offer financial products and savings incentives

• Savings products available onsite (savings
  accounts, savings bonds and CDs)
• Matched savings programs (IDAs and CDs)
• Access to the Savers Credit (federal savings
  match)

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• Moving from Practice to Scale
• Community tax preparation programs are an
  incubator for ideas and for testing new
  approaches
• Ideas may be brought to scale by
• Federal, state, and local government
• Private sector
• Nonprofit sector

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Financial Opportunities Project (FOP)

• Comprehensive effort to identify, implement, and
  disseminate strategies for integrating financial
  services and income tax preparation services at
  community-based tax sites.
• Phase I (2007) Understand Asset Building at tax
  sites
• Phase II (2008) Test and Evaluate Asset Building
  Delivery System (ABDS) at two CEP tax sites
• Phase III (2009) Rollout ABDS at 3 free tax
  preparation programs CASH Rochester (Rochester,
  NY) Campaign for Working Families (Philadelphia,
  PA) and Accounting Aid Society (Detroit, MI)

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FOP Findings

• Need simple and targeted savings messages for
• Unbanked clients
• New savers
• Longer-term savers
• Non-savers who need counseling or other help
• Asset-building messages and promotion should be
  embedded throughout the entire tax preparation
  experience
• Volunteer training and easy-to-use systems are
  critical to engaging volunteers in the
  asset-building process

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• U.S. Savings Bonds
• Partnership between the D2D Fund and NCTC
  affiliates
• U.S. I Bonds offered at tax sites in 2007, 2008,
  and 2009
• In 2010, savings bonds will be back on the tax
  return

2009 pilot reached 67 tax sites in 19 states
Source D2D Fund, "Yes We Can Inclusive Saving
at Tax Time," 2009, http//d2dfund.org/system/fil
es/publications/D2D_YesWeCanReport4_070809_FINA
LFINAL.pdf
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U.S. Savings Bonds Pilot Results
Source D2D Fund, "Yes We Can Inclusive Saving
at Tax Time," 2009, http//d2dfund.org/system/file
s/publications/D2D_YesWeCanReport4_070809_FINAL
FINAL.pdf
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• aveNYC Account Pilot Program
• Clients must direct deposit at least 100 into a
  savings account
• 50 match (up to 250), if clients save for at
  least 1 year
• No ATM or debit card issued
• Accounts offered 1-2 interest

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aveNYC Account Pilot Program
Source Brazil, Caitlyn and Janneke Ratcliffe,
Innovations in Savings the aveNYC Account,
New York City Department of Consumer Affairs,
Office of Financial Empowerment and University of
North Carolina Center for Community Capital,
Presentation for Association for Public Policy
Analysis and Management 2009 Fall Research
Conference, November 7, 2009.
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• Behavioral Insights
• Take-up rates are highest for women with children
• Reasons for saving
• Savings bonds education (62)
• aveNYC emergencies (69)
• First-time savers
• Savings bonds 83 had under 1,000
• aveNYC 63 had under 500

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• What made the Savings Bond Pilot and aveNYC
  successful?
• Strong leadership
• Philanthropic support
• Pilot design and evaluation
• Community-based delivery platform
• Corporate infrastructure

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• Whats on the Horizon?
• Harnessing behavioral economic research
• Commitment devices
• Channel factors
• Federal policy changes
• Opt-out direct deposit of tax refunds
• Refundable Savers Credit
• State and local policy innovations
• San Francisco Workplace initiative to connect
  workers with direct deposit or stored value cards
• San Antonio Integrate personal investment and
  financial education as a mandatory component of
  services

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• What are the keys to future success?
• Partnerships between nonprofits and financial
  institutions
• Support from Treasury and the IRS
• State and local governments (where applicable)
• Investment in innovative nonprofits
• Willingness and ability to take most promising
  approaches to scale

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David Marzahl dmarzahl_at_economicprogress.org (312)
630-0280 Center for Economic Progress www.economi
cprogress.org National Community Tax
Coalition www.tax-coalition.org