“Tax Freedom Day” is a term that was developed as a way to given Americans an idea of how long they have to work each year to earn enough to pay their income taxes. This year, the Tax Foundation estimates that “Tax Freedom Day” will fall on April 19th, ironically two days after Tax Day.
But how long does a family have to work to offset the cost of child care? The average median income in the U.S. is $59,039, which puts their after-tax earnings at around $3,000 per month. The average cost per month for quality center-based child care for two children in the U.S. is just over $1,700 per month or $20,400 per year, according to the National Association of Child Care Resource and Referral Agencies.
That means that the average family will work through the month of July before they have earned enough to offset the cost of their child care for the year.
In addition to the important growing investments from federal, state and local governments aimed at helping families access high-quality child care opportunities, there are other ways to help offset the cost of child care, including important tax benefits such as the Child and Dependent Care Credit (CDCTC). The CDCTC lets you claim up to 35 percent of the cost of qualifying child care expenses up to $6,000 for two or more children. But even with that benefit, too many families still struggle to offset the exorbitant cost of care.
As Americans file their returns today, Congress should be considering how we can do more to ensure that families have the resources they need to not only provide for their families while they work, but also how we can incentivize the highest quality of care possible for our youngest children. Increasing the allowable amount and enhancing the CDCTC to make it refundable would go a long way toward increasing access for care – especially for lower income earners.
Alan Viard, a resident scholar at the American Enterprise Institute (AEI), made the economic case for strengthening the CDCTC in a 2017 op-ed: “If workers are taxed on their wages, they should receive tax relief for the costs they incur to earn the wages, just as businesses deduct the costs of earning the income on which they pay tax. There can be little doubt that child care costs are tied to work.”
Access to child-care is crucial for working parents – but there’s an even more important reason for Congress to make this a priority. Quality early childhood programs provide children with the foundational skills they need to succeed in school and in life. And that’s important – after all – these children are also future taxpayers!