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Here’s an amazingly simple way to cut poverty in the U.S.


Stashed in: Economics!, Awesome, America!, Poverty, Poverty, Basic Income, EITC

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For me as a web person, one of the big messages here is how much difference it makes to citizens to see a DOLLAR FIGURE of money they can get back simply by filing their taxes. I try to remember that the web and social media are blunt instruments, but it is easy to forget.

Not only did teling people the dollar benefits get the best response, but lower benefit numbers performed best:

As you'd expect, complex mailings got fewer responses. But so did ones with informational flyers, and ones including the social stigma line. Giving cash benefit size numbers ($457, $3,043, etc.), by contrast, led to a big increase in uptake.

Interestingly, lower benefit estimates seemed to lead to higher take-up than bigger numbers. Ultimately, the best intervention, with simple notices and worksheets plus the benefit number, led 31 percent of respondents to respond and claim their benefits. Bhargava and Manoli estimate that you could reduce EITC underclaiming by 3 percentage points, and distribute an additional $503 million, if this approach were done nationally.

This is awful:

What would really make a difference, and unlock billions in currently unclaimed money, is a system of automatic dispersal. The IRS typically knows most people's wage income from W-2s filed by employers, and so can probably guess who's eligible for the EITC and file those people's returns for them, ensuring they get the benefits. Hell, the IRS could file returns for everybody. It only doesn't because of an unholy alliance with Intuit, H&R Block, and other tax preparation companies and anti-tax conservatives who want people to be annoyed by taxes annually so as to hate them more.

I'm still wondering why underclaiming rates for major safety net programs are substantial: 

In 2013, 15 percent of people eligible for food stamps didn't get them — down from a whopping 31 percent in 2007. In 2012, 20 percent of people eligible for the earned income tax credit (EITC) didn't get it.

35,050 tax filers in California didn't claim the EITC in 2009, despite their tax returns indicating that they were eligible and despite an initial reminder notice from the IRS. Collectively, these filers had left $26 million to which they were entitled on the table.

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