Overview: Tax Credits as a Service Delivery Challenge

We know tax credits work. Decades of research—including work by the Center on Budget and Policy Priorities and the IRS—show that tax credits like the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC) reduce poverty, improve child outcomes, and boost household stability. Yet access remains uneven: One in four children under 17 didn’t receive the full CTC in 2023, and one in five families eligible for the EITC don’t claim it each year. As the EITC marks its 50th anniversary, there is growing momentum to reimagine how we deliver these critical supports.

Millions of low-income households (many of whom are not required to file taxes due to their income level) miss out on valuable tax credits each year because they struggle to access them through the tax system or don’t realize they qualify. Unlike other public benefits, tax credits are only available to those who file a tax return, making the path to receiving them feel more like a compliance exercise than a support system. Even though tax credits are designed to offer financial relief, they don’t always feel like help.

Tackling service delivery challenges is gaining momentum at the local, state, and federal levels. There is a growing body of evidence showing that tools from behavioral science, service design, product development, and community engagement can improve public services. Yet tax credit uptake challenges are still rarely framed—or addressed—as service delivery challenges. A core principle across these disciplines is simple and essential: Begin with a deep understanding of the people programs are meant to serve.

Before launching this research, the New Practice Lab conducted a landscape analysis of existing studies on households that don’t regularly file taxes. That review found that while there was strong existing research on the demographic characteristics of these households, there was less evidence around the specific logistical barriers they face, and how those barriers shape implementation challenges for government agencies. Building on that gap, we conducted a mixed-methods study to better understand tax filers and potential filers, focusing on the emotional, logistical, and informational hurdles that prevent people from filing—and ultimately, what it would take to deliver tax credits more effectively.

This research draws on two components:

• A nationwide survey of 5,012 respondents (64 percent of whom had not filed taxes in the last three years, and 88 percent of whom had annual household incomes under $65,000)
• A qualitative study with 25 low-income residents from Illinois (all of whom had applied for or received state benefits in the past year)

More details on the study methodologies are provided at the end of this report.

This report shares six reasons why tax credits often fail to reach the people who need them, along with actions governments—particularly state Departments of Revenue (DORs)—can take to start addressing these barriers.

We’ve structured these findings through the lens of how people typically navigate a public benefit journey: learning about, applying for, and receiving support.