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Susanna Birdsong's picture

Fact: There are more households with working parents than ever before.  Fewer than 1 in 3 children today have a full-time, stay-at-home parent.

Fact: Child care is incredibly expensive—disproportionately so for low-income families.  The average cost of full-time care ranges from $3,900 to $15,000 a year, depending on where the family lives, the type of care, and the age of the child.  Low-income families who use paid child care spend over 32 percent of their income on child care every month [PDF] (five times the percentage that families living above 200% of the federal poverty level spend).

Fact: Mothers—including those who work full-time outside the home—continue to shoulder more caregiving responsibilities at home—and pay the price of reduced income over time.

Fact: Currently available child care assistance is inadequate to address the real needs of real families—especially low-income families.  In 2013, nineteen states had child care assistance waiting lists that ranged from a few months to a few years.

Fact: Families who pay for child care throughout the year are eligible for a federal tax credit to recover a portion of the cost of care—but this credit provides limited benefits to low-income families because it is not refundable.

Fact: The Child CARE Act, just introduced in Congress, would amend the federal Child and Dependent Care Tax Credit (CDCTC) and make it more responsive to the needs and realities of low-income families who are currently struggling to cover the cost of child care.

The Child CARE Act, sponsored by Rep. Donna Edwards (D-MD), makes two key changes to the current CDCTC:

  1. It makes the federal tax credit refundable.  Currently, the CDCTC can only be used to offset federal income tax liability—so if a family makes too little to owe any income tax, the credit provides no benefit to them.

Here’s an example: Carly is a single mom with 2 kids, an income of $15,000, and child care expenses of $6,000.  She is theoretically entitled to the maximum CDCTC of $2,100.  BUT—her federal income tax liability before any credits is $0, so she’s not eligible for any benefit because the credit is not refundable.

If the Child CARE Act passed, and the CDCTC was made refundable, Carly would receive $2,100 at tax time to partially offset the $6,000 she spent on child care in the previous year.

2. It indexes the CDCTC to inflation.  The current income limits in the CDCTC—last updated in 2001—are not indexed for inflation, resulting in a loss of value over time.  Currently, the credit amount begins to decrease from the $2,100 high point when a family’s income rises above $15,000.  This means that the credit begins losing value when a family’s income is still well below federal poverty guidelines, and provides a diminished benefit to families who may not be eligible for any other type of child care assistance.

If the Child CARE Act passed, income thresholds would rise with the annual pace of inflation—providing meaningful assistance to families year after year.

The Child CARE Act is not the only bill aimed at helping families afford the high cost of child care—in fact, Rep. Ruppersberger (D-MD) and Sen. Boxer (D-CA) introduced a measure last year that would, among other things:

  • Double the maximum value of the current CDCTC
  • Double the amount that a family could make and still claim the maximum credit, and
  • Make the credit refundable.

I applaud the efforts of all of these lawmakers.  In tough economic times, low-income women and their families need all the help they can get to cover the cost of child care.  It’s just one step policymakers can take to ensure that women thrive at work – and create economic prosperity for all.

[This entry is cross-posted on the National Women's Law Center's blog, Womenstake.]

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