D2D Fund

During the 2007 tax season, Professor Peter Tufano, founder of D2D Fund, collaborated with H&R Block to study offering U.S. Savings Bonds (Series I) at 27 H&R Block tax preparation offices. 3,729 clients with federal refunds greater than $500 received a scripted offer to purchase US Savings Bonds. 220 (or 5.9%) of these clients chose to purchase bonds spending an average of $228 each which resulted in tax time savings of $50,100.

Among the key preliminary learnings of this pilot study:

• This pilot showed that significant demand was exhibited by commercial tax preparation clients for US Savings Bonds at tax time. Low-to-moderate income (LMI) households and clients with little or no savings demonstrated an interest in tax time savings with bonds.
• Compared to H&R Block clients who were not offered bonds, purchasers had lower adjusted gross income (AGI), higher tax refund amounts, a greater number of dependents, and were more likely to file as head of household.
• Approximately 40% of bond buyers reported that they had no savings or investments when surveyed during the study. Of those who reported savings, approximately 22% reported total savings and investments of $1,000 or less.
• Unlike many other savings vehicles, it is possible to buy bonds on behalf of others. In our experience, this feature was appealing to clients in this study. Almost 70% of purchasers bought savings bonds for others. In focus groups and surveys, H&R Block Tax Professionals (“Tax Pros”) indicated that clients seemed to respond to bond discussions focused on saving for children and grandchildren, and, more specifically, saving for their education.
• In all H&R Block offices, two savings products were available to clients: (1) a 5% APR savings account, “Easy Savings” and (2) an IRA product, “Easy IRA.” Among clients in our research study, the savings bond take-up rate was higher than for these products. Additionally, bond purchasers exhibited a higher take-up rate of these savings products as well.
• Preliminary analyses indicate that the offices that sold bonds (i.e., treatment offices) reported higher total tax time savings among clients than offices not selling bonds (i.e., control offices). Because both treatment and control offices surveyed research participants, we posit a “bond offer effect” in Block treatment offices that resulted in a higher rate of tax time savings among clients in offices selling bonds this tax season.

This memo discusses the details of the 2007 tax season H&R Block US Savings Bond pilot which ran for 14 weeks in two cities: Boston, MA and Schaumberg, IL. The paper reviews preliminary findings related to take-up rate, bond purchasing decisions, and buyer data collected through the tax form. This report concludes with some initial interpretations as well as early policy recommendations.