Teaching the Tax Code: Earnings Responses to an Experiment with EITC Recipients
Last registered on October 03, 2016

Pre-Trial

Trial Information
General Information
Title
Teaching the Tax Code: Earnings Responses to an Experiment with EITC Recipients
RCT ID
AEARCTR-0001601
Initial registration date
October 03, 2016
Last updated
October 03, 2016 3:21 PM EDT
Location(s)
Primary Investigator
Affiliation
Stanford University
Other Primary Investigator(s)
PI Affiliation
Department of Economics, University of California Berkeley; National Bureau of Economic Research
Additional Trial Information
Status
Completed
Start date
2006-10-01
End date
2013-01-01
Secondary IDs
Abstract
We conducted a randomized experiment with 43,000 EITC recipients at H&R Block. Tax preparers gave simple, personalized information about the EITC schedule to half of their clients. We find no significant effects of information provision on earnings in the subsequent year in the full sample. Further exploration uncovers evidence of heterogeneous treatment effects on both self-employment income and wage earnings across the 1,461 tax preparers involved in the experiment. Providing information about tax incentives does not systematically effect earnings on average. However, tax preparers may influence their clients' earnings decisions by providing advice about how to respond to tax incentives.
External Link(s)
Registration Citation
Citation
Chetty, Raj and Emmanuel Saez. 2016. "Teaching the Tax Code: Earnings Responses to an Experiment with EITC Recipients." AEA RCT Registry. October 03. https://www.socialscienceregistry.org/trials/1601/history/10989
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Experimental Details
Interventions
Intervention(s)
The researchers evaluated a randomized control trial to determine if teaching individuals about the Earned Income Tax Credit (EITC) affects their labor supply choices. The literature indicates that the EITC increases labor force participation among the unemployed, but has little effect on the hours worked of the previously employed. This suggests that recipients know receiving the EITC is conditional on working, but do not think about the slope of the EITC schedule when making marginal earnings decisions.

At 119 H&R Block offices in the Chicago metropolitan area, 42,000 EITC-eligible tax filers who had at least one dependent took part in the experiment. Participants were randomly selected into treatment and control groups based on the final two digits of their Social Security number. The treatment group received a two-minute explanation of the EITC and the implications for their labor decisions. The control group received no additional information about the EITC. Data was collected from participants' tax returns who filed at H&R Block in both 2007 and 2008, allowing a panel study of the information effects on earnings. A post-experiment survey of H&R Block employees was also collected.
Intervention Start Date
2007-01-01
Intervention End Date
2007-04-15
Primary Outcomes
Primary Outcomes (end points)
Change in EITC amount;
Change in Earnings
Primary Outcomes (explanation)
Secondary Outcomes
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
Experimental Design
Experimental Design
For the treatment, researchers developed a two-minute information module delivered by H&R Block employees at the end of participants' tax return preparation. The module included a verbal explanation of how the EITC works, a graphical representation of the EITC schedule as a function of income, and a table with EITC ranges. The graph and table representations were customized to the individual's marital status and number of dependents. Together, the H&R Block employee and the participant filled out a worksheet based on the participant's 2006 earnings that gives their 2007 EITC return. This was used to demonstrate the client's location on the graph and table of the EITC schedule. The participants were then given take-home messages based on their location in the EITC schedule. In the increasing range, the take-home message is “Suppose you earn $10 an hour, then you are really making $14 an hour. It pays to work more!” In the peak range, the message is “Your earnings are maxing-out the EIC amount.” In the decreasing range, the message is “If you earn $10 more, your EIC is reduced by $2.10. Earning more reduces your EIC, but you may qualify for additional tax credits.” A printout including all of the above information was presented to the participants at the end of session, and an additional letter summarizing the EITC information was sent to treatment participants in August 2007 to reinforce the treatment.
Experimental Design Details
Randomization Method
Randomization done in computer by last two digits of individual's Social Security number
Randomization Unit
Randomization is at the individual level
Was the treatment clustered?
No
Experiment Characteristics
Sample size: planned number of clusters
Year 1: 42002 individuals
Returned in Year 2: 30305 individuals
Sample size: planned number of observations
Year 1: 42002 individuals Returned in Year 2: 30305 individuals
Sample size (or number of clusters) by treatment arms
Yeah 1: 21193 individuals in the control group; 20809 individuals in the treatment group

Returned in Year 2: 15380 individuals in the control group; 14925 individuals in the treatment group
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB
INSTITUTIONAL REVIEW BOARDS (IRBs)
IRB Name
Study has received IRB approval. Details not available.
IRB Approval Date
Details not available
IRB Approval Number
Details not available
Post-Trial
Post Trial Information
Study Withdrawal
Intervention
Is the intervention completed?
Yes
Intervention Completion Date
April 15, 2007, 12:00 AM +00:00
Is data collection complete?
Yes
Data Collection Completion Date
April 15, 2008, 12:00 AM +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
Year 1: 42002 individuals
Returned in Year 2: 30305 individuals
Was attrition correlated with treatment status?
No
Final Sample Size: Total Number of Observations
Year 1: 42002 individuals
Returned in Year 2: 30305 individuals
Final Sample Size (or Number of Clusters) by Treatment Arms
Year 1: 21193 individuals in the control group; 20809 in the treatment group Returned in Year two: 15380 individuals in the control group; 14925 in the treatment group
Data Publication
Data Publication
Is public data available?
Yes
Program Files
Program Files
Reports and Papers
Preliminary Reports
Relevant Papers
Abstract
We conducted a randomized experiment with 43,000 EITC recipients at H&R Block. Tax preparers gave simple, personalized information about the EITC schedule to half of their clients. We find no significant effects of information provision on earnings in the subsequent year in the full sample. Further exploration uncovers evidence of heterogeneous treatment effects on both self-employment income and wage earnings across the 1,461 tax preparers involved in the experiment. Providing information about tax incentives does not systematically effect earnings on average. However, tax preparers may influence their clients’ earnings decisions by providing advice about how to respond to tax incentives.
Citation
Chetty, Raj and Emmanuel Saez. 2013. "Teaching the Tax Code: Earnings Responses to an Experiment with EITC Recipients." American Economic Journal: Applied Economics, 5(1): 1-31.