Evaluating the Lump Sum Tax Refund and Household Spending

The Earned Income Tax Credit (EITC) is the largest means-tested cash transfer program in the United States, and accounts for a significant share of income for those who receive it. As opposed to most other federal and state transfer programs, the credit is disbursed only once a year, resulting in uneven cash flow for recipients that may undermine their economic security. Interestingly however, past programs that have offered a distributed payment schedule have suffered from low take-up. The purpose of this research is to explore the determinants of demand for, and the effects of, a novel periodic EITC payment program. In cooperation with the Center for Economic Progress, researchers will first conduct pilot activities to learn more about demand for periodic payment and how best to implement it. We hypothesize that offering periodic payment outside of tax season (when the loss of a lump sum may loom large relative to year-long stability) and providing framing for this offer could increase demand for periodic payments. Based on findings from the pilot, the full-scale study will use a randomized controlled trial to test the effects of a periodic EITC payment on participant financial security, purchasing power, and labor-force behavior.