Tax Time is the Time to SaveAsset Funders Network webinarNovember 12, 2009

David Marzahl, Executive Director

MissionThe 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.

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.

What needs to change for our vision to become reality?

•Individual behaviors

•The marketplace

•Public policies

2008 Filing SeasonAll

taxpayersLow-

income1

Moderate-income2

Federal returns filed 143 million 59 million 35 million

Returns with a refund 108 million 48 million 28 million

Refund amount $268 billion $77 billion $63 billion

Average refund $2,500 $1,600 $2,200

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 $25,0002. Moderate-income: Adjusted gross income between $25,000 and $50,000

Operating Framework

Center for Economic Progress: 2009 Results

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

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.

Community Tax Preparation:2009 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

How do NCTC affiliates change behavior and move 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

Draw un-banked and under-banked

clients into the marketplace

• Savings messages at tax time

• Alternative RALs1 and other

short-term loans

• Credit counseling and credit

reporting

• Financial coaching and

financial education

Encourage clients to think

about their finances

1. RAL stands for refund anticipation loans, which are one- to two-week loans secured by taxpayers’ expected refunds.

• Savings products available

onsite (savings accounts,

savings bonds and CDs)

• Matched savings programs

(IDAs and CDs)

• Access to the Saver’s Credit

(federal savings match)

Offer financial products

and savings incentives

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:

o Federal, state, and local government

o Private sector

o Nonprofit sector

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)

FOP Findings

• Need simple and targeted savings messages for:

o Unbanked clients

o New savers

o Longer-term savers

o 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

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

Source: D2D Fund, "Yes We Can: Inclusive Saving at Tax Time," 2009, http://d2dfund.org/system/files/publications/D2D_Yes+We+Can+Report4_070809_FINALFINAL.pdf

2009 pilot reached 67 tax sites in 19 states

U.S. Savings Bonds Pilot Results

  2007 2008 2009

Average AGI of bond purchasers - $19,299 $21,528

Tax Sites 4 32 67

Clients purchasing bonds 231 1,086 1,708

Amount invested $42,800 $202,550 $379,176

Average amount saved per purchaser

$185 $187 $222

Source: D2D Fund, "Yes We Can: Inclusive Saving at Tax Time," 2009, http://d2dfund.org/system/files/publications/D2D_Yes+We+Can+Report4_070809_FINALFINAL.pdf

$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

$aveNYC Account Pilot Program2008 2009

Accounts opened 151 944

Total savings $58,489 $359,586

Average savings $387 $381

Participation rate (direct deposit users) 10% 18%

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.

Behavioral Insights•Take-up rates are highest for women with children

•Reasons for saving

o Savings bonds: education (62%)

o $aveNYC: emergencies (69%)

•First-time savers

o Savings bonds: 83% had under $1,000

o $aveNYC: 63% had under $500

What made the Savings Bond Pilot and $aveNYC successful?

•Strong leadership

•Philanthropic support

•Pilot design and evaluation

•Community-based delivery platform

•Corporate infrastructure

What’s on the Horizon?•Harnessing behavioral economic research

o Commitment devices

o Channel factors

•Federal policy changes

o Opt-out direct deposit of tax refunds

o Refundable Saver’s Credit

•State and local policy innovations

o San Francisco: Workplace initiative to connect workers with direct deposit or stored value cards

o San Antonio: Integrate personal investment and financial education as a mandatory component of services

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

David Marzahl

dmarzahl@economicprogress.org

(312) 630-0280

Center for Economic Progress

www.economicprogress.org

National Community Tax Coalition

www.tax-coalition.org