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Yahoo
07-05-2025
- Business
- Yahoo
Opinion: The Child and Dependent Care Tax Credit Is Long Overdue for Reform
You'd be forgiven for having trouble keeping up with the alphabet soup of family-related tax credits. Most of the policy attention has rightfully been on the child tax credit (CTC), which is typically a credit parents claim that provides general assistance for child-rearing and is claimed by 93% of taxpayers with children. This tax credit is often used for essentials like food, diapers and clothing, or to pay off debt, though it can also offset the cost of child care. However, there is also an important conversation happening around the child and dependent care tax credit (CDCTC). This is a totally separate tax credit that allows working parents to get a break on their taxes based on a percentage of what they spend on the care of eligible children and adult dependents. As Republicans prepare their budget reconciliation package, CDCTC reforms have been put on the table — and deserve the attention of early childhood stakeholders. A Brief History of the CDCTC The origins of the CDCTC track back to 1954, when a very limited deduction was introduced for child care expenses. According to a compendium on tax expenditures prepared by the Congressional Research Service (CRS), 'The provision was intended to recognize the similarity of child care expenses to employee business expenses and provide a limited benefit.' That deduction was converted into the CDCTC in 1976, as mothers were flooding into the labor force and the nation had no publicly-supported child care system for them. There have been periods of reform since then, but the credit has been stuck in the mud for more than two decades: It has been $3,000 for one child and $6,000 for two or more children since 2001. Without adjustment for inflation, its power has become badly diluted, according to the Bipartisan Policy Center. There was one exception, which was a temporary pandemic boost in 2021 which had a significant impact for many working families. (That boost increased the average credit award by more than $1,500 and led to almost 3 million more families claiming it). Get stories like this delivered straight to your inbox. Sign up for The 74 Newsletter Historical Structure of the child and dependent care tax credit (Bipartisan Policy Center) As a result, the average credit per family falls between $500 and $600, meaning their tax liability is reduced by that amount. Reducing the taxes one owes by a few hundred dollars is not nothing, but hardly enough to make much of a dent in child care costs, which commonly run in the thousands and can easily tip into five figures. The Good The CDCTC's strongest suit is how it functions as a broad vehicle to defray child care costs. (Families can claim the CDCTC to offset the cost of care for a spouse or adult dependent with a disability, but CRS notes that it is used 'almost exclusively' for child care.) The credit has become especially key for middle-income families since there is no other federal government mechanism to support them with child care costs; all other federal child care assistance is targeted to low- and moderate-income families. Middle-income families heavily use external child care programs, yet they fall into something of a 'donut hole' — they often make too much money to qualify for public assistance, but not enough money to be able to comfortably afford programs' sky-high prices. Absent a strong universal child care system, the CDCTC (or some variation thereof) is necessary to provide some relief. The CDCTC is also fairly inclusive. While one needs the taxpayer ID of the individual or program used to provide care, the provider can be nearly anyone other than a parent, meaning that it is not limited to licensed care providers. The Bad The CDCTC offers important support for many families, but the design is car-with-a-fat-tire clunky. The IRS guidance on claiming the credit is 20 pages long. There are a number of elements including eligibility criteria, extensive rules around earned income, work-related expenses and filing a joint return, and a provider identification test. It is, in short, not an easy credit to claim. Only 12% of taxpayers with children utilize it. Moreover, the credit does nothing to support broader systems-building in child care. The fundamental problem is that there is not enough public money in the child care system, so it exists as a failed market with high costs for parents, low pay for providers and scarce supply. The government alleviating a sliver of a families' expenses during tax season leaves the structural issues completely untouched. On a philosophical level, it keeps child care support in the realm of fiscal tax policy as opposed to being seen as essential social infrastructure. Related What the Looming Child Tax Credit Expiration Means for Your Family The Ugly The CDCTC is strongly regressive, meaning that the benefits flow disproportionately to more affluent families. 'Currently, nearly 44% of tax returns that claim the CDCTC come from families with an AGI [adjusted gross income] over $100,000; only 6% of returns from households making under $25,000 a year claim the credit, despite those households accounting for 33% of all returns,' writes Elise Anderson, a researcher and policy analyst at Capita. One reason for the huge disparity is that the CDCTC is non-refundable, meaning that a parent needs to owe a particular amount each year in order to receive the full credit. In other words, if a household has no tax liability — which is true for the majority of parents in lower-income households due to the standard deduction and other credits — they don't get any benefit. Finally, the CDCTC categorically excludes stay-at-home parents; families that do not have both parents working outside the home may not claim the credit. The ostensible logic that the CDCTC is a credit to defray tax liability for parents in the labor force doesn't hold up to scrutiny. Families with a stay-at-home parent contribute income taxes by filing jointly, and the labor of many stay-at-home parents enables a spouse to work, particularly if one parent works a job that doesn't lend itself to regular, predictable hours, like an electrical lineworker or a firefighter who works on wildfires, for example. What Ideas Are Being Proposed? There is a reasonable argument to be made to just merge the CDCTC into a broader child tax credit and simplify the whole system. However, that is not realistically on the table at present. Instead, there are a few different reform options being proposed: A comparative look at recent Child and Dependent Care Tax Credit proposals (Capita) The most relevant proposal, due to the profiles of its sponsors, is the Child Care Availability and Affordability Act. The legislation was introduced in early March by a bipartisan group led by Alabama Republican Sen. Katie Britt and Virginia Democratic Sen. Tim Kaine, and New York Republican Rep. Mike Lawler and California Democratic Rep. Salud Carbajal. It has endorsements from groups not always seen together such as the U.S. Chamber of Commerce and the American Federation of Teachers. Britt is pushing hard to see the legislation folded into the Republicans' budget reconciliation law. If passed, the maximum amount of expenses that a family could claim would increase to $5,000 for one child and $8,000 for two or more children. It would also make the CDCTC partially refundable, meaning that a portion of it would go to families even if they owe no taxes, and lower-income families would have access to a larger credit. In practical terms, a family with one child with an adjusted gross income of $15,000 would be able to claim a credit of $2,500 on $5,000 worth of child care expenses and have that amount refunded if they did not owe taxes. Under the current law, that same family with the same expenses can only claim $1,750 and none of it is refundable. Whatever policy, if any, ultimately ends up making its way into the budget reconciliation package, the CDCTC is long overdue for reform. Child care stakeholders would do well to spend some time getting acquainted with the different plans so they can fully engage in the upcoming debates. Disclosure: Elliot Haspel is a senior fellow at Capita.
Yahoo
26-04-2025
- Business
- Yahoo
Readers on the need for child-care support and a close call
Working families with young children in Oklahoma need support finding and affording child care. Updating child care tax credits like the ones included in the Child Care Availability and Affordability Act sponsored by Sens. Katie Britt, of Alabama, and Tim Kaine, of Virginia, would help. In his role on the Senate Finance Committee, Sen. James Lankford, of Oklahoma, can help prioritize the needs of working families by including these provisions in the upcoming tax package. Expanding tax credits like the Child and Dependent Care Tax Credit (CDCTC) would put more money in parents' pockets for child care. This tax credit helps children thrive while recognizing child care as a necessary expense that helps parents go to work. However, it hasn't been updated in more than 20 years, so it hasn't kept pace with what child care actually costs. Currently, the average credit families receive is $587. Under the Britt-Kaine proposal, a parent with one child paying $12K for child care ($1K per child per month) would receive a credit of $1,750. Parents with two children would receive even more. Families with young children can't push pause on their child care needs and deal with it a few years down the road — kids don't work like that! Protecting and expanding the CDCTC is a pro-family and pro-work solution that benefits everyone. ― Elissa Kuykendall Want the latest Viewpoints? Sign up for the Public Square newsletter. I've enjoyed our articles about the 1995 bombing, and I have a small anecdotal event that happened on that dreadful day. I was an officer at a bank in El Reno, American Heritage Bank, and the morning of the bombing I had an 8 a.m. meeting at the state Capitol. The day before, one of our officers, Robert Hadley, who had reached retirement age, came in to let me know he had an appointment the next morning at the Social Security office at the Murrah Building to set up his Social Security benefits. Because of my meeting at the state Capitol, I asked Robert if he could move his meeting time at the Social Security office. Minutes later he told me he was able to get a 2 p.m. appointment, and that he and his wife and a 10-year-old grandson would make that work. We know what happened that morning and I was walking in the parking lot when the bomb went off. I felt the explosion like everyone else did. Once we realized how narrowly Bob, his wife and grandson had avoided being in that office, he retired that week knowing how precious life is. Thank you for sharing the moment in history that we all wish had never happened. ― Douglas Tippens, El Reno More: Oklahoma City bombing, 30 years later: Our city's stories of strength, healing and hope Oklahoma's rural counties are facing a crisis. With limited behavioral health services and high rates of substance use and incarceration, it's time we invest in real, community-driven solutions. That's why I'm writing in support of Senate Bill 251. This letter is part of a statewide advocacy project I've been working on with my classmates at the University of Oklahoma's School of Social Work. Over the past few months, our team has written policy briefs, hosted conversations, and even met with professionals and policymakers to advocate for this bill. SB 251 stood out to us because it offers a practical, much-needed path toward justice and healing across Oklahoma. The bill creates the County Community Safety Investment Fund and ensures every county — no matter how small — receives a minimum share of funding to build or strengthen local programs. These services include crisis response teams, recovery support, and jail diversion programs. These kinds of services are critical. People living in rural Oklahoma are 57% more likely to struggle with meth or opioid use, and nearly one in three rural women report experiencing intimate partner violence, according to the Oklahoma Council for Justice 251 isn't just smart policy — it's the kind of investment that could make our communities safer, healthier and more hopeful. I truly hope our lawmakers will move it forward this session. — Victoria Mendez, OU-Tulsa School of Social Work This article originally appeared on Oklahoman: How a family narrowly missed the OKC bombing | Letters
Yahoo
01-03-2025
- Politics
- Yahoo
Advocates push for improved family benefits as key bills stall
VICTORIA BUDIONO / VBUDIONO @ Advocates rallied Friday in support of improved benefits for Hawaii's keiki. 1 /2 VICTORIA BUDIONO / VBUDIONO @ Advocates rallied Friday in support of improved benefits for Hawaii's keiki. VICTORIA BUDIONO / VBUDIONO @ State Sens. Kurt Fevella (R, Ewa Beach-Ocean Pointe-Iroquois Point ), left, and Sharon Moriwaki (D, Waikiki-Ala Moana-Kakaako ) advocated Friday for bills that promote economic security and equity for children, affordable child care programs, preschool and other causes at the state Capitol rotunda. 2 /2 VICTORIA BUDIONO / VBUDIONO @ State Sens. Kurt Fevella (R, Ewa Beach-Ocean Pointe-Iroquois Point ), left, and Sharon Moriwaki (D, Waikiki-Ala Moana-Kakaako ) advocated Friday for bills that promote economic security and equity for children, affordable child care programs, preschool and other causes at the state Capitol rotunda. VICTORIA BUDIONO / VBUDIONO @ Advocates rallied Friday in support of improved benefits for Hawaii's keiki. VICTORIA BUDIONO / VBUDIONO @ State Sens. Kurt Fevella (R, Ewa Beach-Ocean Pointe-Iroquois Point ), left, and Sharon Moriwaki (D, Waikiki-Ala Moana-Kakaako ) advocated Friday for bills that promote economic security and equity for children, affordable child care programs, preschool and other causes at the state Capitol rotunda. Advocates are intensifying their efforts to push for improved family benefits for Hawaii's children as key bills addressing these issues remain stalled in the Legislature. The Paid Family &Medical Leave bills—House Bill 755, HB 695, Senate Bill 852 and SB 1054—seek to provide working families with paid time off to care for a new child, recover from illness or assist a loved one. While the nation remains the only developed country without a national paid family leave program, 13 states and the District of Columbia have implemented similar laws. Advocates, including the Hawaii Children's Action Network, are calling on the state to join them. HCAN is also advocating for an increase in the Child and Dependent Care Tax Credit—HB 753. The cost of preschool in Hawaii averages over $13, 000 per year, and working families are in dire need of help with child care expenses, the organization said. In 2023, Hawaii lawmakers took an initial step to support families by quadrupling the maximum amount that taxpayers can claim for child and dependent care expenses. However, a cap on the percentage of care expenses that can be claimed with the CDCTC makes it nearly impossible for families to access these increased amounts. The bill proposes increasing the CDCTC percentage cap, allowing working families to receive more assistance for child care costs. Don 't miss out on what 's happening ! Stay in touch with breaking news, as it happens, conveniently in your email inbox. It 's FREE ! Email 28141 Sign Up By clicking to sign up, you agree to Star-Advertiser 's and Google 's and. This form is protected by reCAPTCHA. Both HB 755 and HB 753 are stalled in the House Finance Committee, and related bills have not been heard after passing their first hearings. State Rep. Jeanne Kapela (D, Volcano-Hawaiian Ocean View ) told the Honolulu Star-Advertiser that the ongoing federal instability has had a trickle-down effect on state legislation. She explained that the uncertainty in federal funding has made it difficult for the state to plan and allocate resources for essential programs. 'The problem is that when you look at what's happening at the federal level, there's a trickle down to our state, ' Kapela said. 'It's hard for the state to figure out what to do here, and what gaps are we going to need to fill ?' She added that the uncertainty surrounding funding has caused delays in passing important bills like paid family leave and tax credits. Kapela emphasized that while some bills have been stalled, there is still potential to make progress, particularly if there is a related legislative vehicle. 'We're still at a point where if there is a vehicle that's related to something, we could potentially do something, ' Kapela said. 'We're not at the end, but we really have to figure out how to save money on the state side so we can come back and fix the holes that we're going to ultimately have to fix.' She noted that the state might have a clearer financial outlook once Congress passes its budget bill in March. Nicole Woo, HCAN's director of research and economic policy, explained that nearly half of Hawaii's children live in households experiencing financial hardship. While almost 1 in 8 are in poverty, an additional 1 in 3 live in households that aren't officially poor, but still struggle to afford the basics. In testimony for HB 753, Aloha United Way argued that tax credit adjustments like those in the bill are effective tools to reduce poverty and stabilize families, especially during times of crisis or when care-giving requires a family member to leave paid employment. The organization highlighted that the proposed changes would provide much-needed financial relief for ALICE—asset-limited, income-constrained, employed—families, who are employed but earn too little to meet basic living costs. The 2024 State of ALICE in Hawaii report showed that 40 % of Hawaii's residents are considered ALICE, and 15 % of households are struggling with the financial costs of caregiving for someone other than a child. Woo also advocated for the passage of the Paid Family &Medical Leave program, arguing that paid leave benefits children by supporting their parents. She cited research through HCAN showing that states with paid family leave enjoy significant health, social and economic benefits, particularly for working women, who are healthier, more economically secure and more likely to remain in the workforce. The bill would provide up to 12 weeks of parental, care-giving, deployment or safe leave per year, along with up to 26 weeks of medical leave, in line with Hawaii's law on temporary disability insurance.
