This week during the President’s Weekly Address, Donald Trump spoke about tax reform and his four overarching principles of reforming the tax code. One principle focused on the administration’s goal of supporting American families through tax cuts and reforms.
“We want to help families keep more of what they earn – and to be able to afford the costs of raising a family,” he said.
We whole-heartedly agree that tax reform can help families – particularly those with young children. And while there are a handful of tax credits and deductions that support families with children, only the Child and Dependent Care Tax Credit (CDCTC) was designed to help working parents with the cost of work-related child care expenses.
Lately, some within the administration, including Ivanka Trump, have specifically mentioned expanding the Child Tax Credit (CTC) as the way to support families raising children. While the CTC performs an important function and helps to equalize tax treatment for families, it is not targeted at working parents and won’t help to increase access to quality child care. Strengthening the CDCTC, as well as the CTC, will support families and ensure that children have better access to quality child care.
We know that early childhood education for children from birth through age five results in positive economic returns for families and society. However, as a nation, we’re struggling with high costs and shortages of quality care providers. And unfortunately, the CDCTC is outdated and can’t meet the current needs of working families. Congress can change that. Making the CDCTC a more robust tax incentive for quality care will help to improve the situation by making care more affordable while incentivizing growth and expansion in the early education sector, resulting in increased access.
The U.S. has traditionally used the tax code to address real world problems many Americans face, and to incentivize behaviors that result in overall economic benefits. For example, we incentivize people to save for retirement through deductions and exclusions in the tax code. We also use the tax code to encourage homeownership and college education. Over time, these incentives have helped to make college attendance and homeownership possible for more Americans.
As a nation, we’re struggling with high costs and shortages of quality child care providers. In the same vein that we use tax credits to make higher education more accessible, the tax code should also make care for children from birth through age 5 a priority. A robust child care tax incentive will help to change that dynamic by making care more affordable for parents, and incentivizing growth and expansion in the early childhood education sector, resulting in increased access and improved care.
To help the CDCTC better fulfill its role and help working parents of modest means afford the cost of child care, tax reform should 1) maintain this critical credit amidst efforts by some whose primary goal is to flatten the code, 2) increase the value of the CDCTC sharply and 3) make the CDCTC refundable, so low- and middle-income families can benefit.
As the president stated in his address, “Our tax code should recognize that the most important investment we can make is in our children,” it is important to remember that the Child Tax Credit alone doesn’t accomplish this – the CDCTC must also be expanded.
Now, as the administration works with Congress in pursuit of comprehensive tax reform to support families, maintaining and expanding the Child and Dependent Care Tax Credit is the best way to directly invest in children’s future. This must be a top priority.
Read more about the ways Congress can support families with young children through tax reform at http://www.ffyf.org/tax