Washington, D.C. – Today, the Senate Finance Committee released its tax reform proposal, which maintains the Child and Dependent Care Tax Credit (CDCTC). The Senate tax writing committee’s treatment of the CDCTC, which aligns with the tax plan released by the House last week, reaffirms that lawmakers are committed to preserving this critical tax credit for working families, even if it falls short of what families really need. While maintaining the CDCTC is an important first step given calls by some to eliminate it, the First Five Years Fund (FFYF) sees tax reform as an opportunity to better support working families struggling with the rising cost of child care by expanding the CDCTC and making it refundable.
“For decades, the Child and Dependent Care Tax Credit has played a critical role in helping America’s working families afford the cost of child care,” said FFYF executive director Kris Perry. “But we know there is still more lawmakers can do through tax reform to help parents with their child care expenses. As tax reform legislation moves forward, we are hopeful Senate champions like Senators Burr, King, Heller, and Collins will be able to work with their colleagues to expand the CDCTC to reflect today’s high cost of care and make it refundable to reach more low- and middle-income households who need it most. These steps will help ensure that the credit achieves its intended purpose – provide tax relief for the child care costs parents incur to earn a living.”
Created in 1976, the CDCTC is the only provision in the tax code specifically designed to help working families with the cost of work-related child care expenses. More recently, the credit has received bipartisan support for expansion through the Promoting Affordable Care for Everyone (PACE) Act, introduced in the Senate by Senators Richard Burr (R-NC) and Angus King (I-ME), and in the House by Representatives Kevin Yoder (R-KS) and Stephanie Murphy (D-FL). Earlier this week, FFYF hosted a bipartisan briefing on Capitol Hill with the sponsors of the PACE Act to discuss the importance of this vital tax credit. Nobel Prize-winning economist Dr. James Heckman has written that, “Anything short of [strengthening the CDCTC] will be a missed opportunity to spur economic growth for generations to come.”
The U.S. has historically used the tax code to address real-world problems faced by Americans and incentivize behaviors that result in overall economic benefits. Just as tax credits are used to make higher education and homeownership more accessible, the tax code should prioritize access to high-quality care for children from birth through age five.
As the Senate and House move closer to finalizing tax legislation, FFYF remains hopeful that lawmakers will not only maintain the CDCTC, but strengthen it to reflect the challenges facing working families with children both today and into the future.
The First Five Years Fund provides knowledge, data and advocacy – persuading federal policymakers to make investments in the first five years of a child’s life that create greater returns for all. FFYF helps America achieve better results in education, health and economic productivity through investments in quality early childhood education programs for disadvantaged children. http://www.ffyf.org