In order to create a tax system that works for everyone, we need to understand the challenges, goals, and lived experiences of the low-to-moderate income (LMI) workers and families who often rely on tax credits and refunds to pay for essentials like groceries, rent, and transportation.
Over the last year, we’ve launched widespread surveys to LMI tax filers and financial coaches and conducted an environmental scan of tax-focused fintechs, including:
The intricacies of the tax system act as barriers to eligible tax filers from successfully navigating the system, causing too many LMI, particularly Black and Brown women, to miss out on critical tax benefits and further exacerbating the racial and gender wealth gap. Our research shows that LMI tax filers report not filing taxes and/or claiming tax credits due to confusion of eligibility, fear of audits and immigration status, and prior negative filing experiences when household changes led to reduced refunds unexpectedly.
Tax credits like the Children’s Tax Credit (CTC) and Earned Income Tax Credit (EITC) are some of our most effective tools for reducing poverty and lifting children above the poverty line. Our research shows that Low-to-Moderate Income (LMI) workers and families who receive a refund use it wisely – to prioritize basic living expenses, paying down debt, and making large purchases with the yearly infusion of cash, such as a car or appliance.
In 2024, technology like online banking, payment apps, and e-filing solutions are abundant, but LMI workers and families aren’t often informed about these options or encouraged to use them. Our research shows that greater than 50% of LMI are already using some form of fintech, but in the absence of regulation, they need other trusted sources to help them identify which tools they should use to build financial security and avoid harm.
In 2024 we will be releasing additional findings, research, and recommendations directly to our community of practice and via national media outlets, think tanks, and other leaders in tax equity and financial security.
The best way to stay informed about future research is to subscribe here.
Tax Truths is an initiative of Change Machine, a national nonprofit organization that builds financial security for low-income people. Research was conducted in partnership with United Way Worldwide, and support is provided by the Rockefeller Foundation and the Citi Foundation.
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