Nancy Duff Campbell is co-president of the National Women’s Law Center .
Access to high-quality child care is essential for parents to work and for children to develop and thrive. But child care is too often unaffordable or simply unavailable, and the public investment needed to address these deficiencies has been grossly inadequate.
Studies show that child care assistance helps low-income parents enter the workforce and stay employed. Single mothers who receive child care assistance are 40 percent more likely to remain employed after two years than single mothers who do not receive such assistance. Former welfare recipients with young children are more than 80 percent more likely to be employed after two years if they receive help with child care expenses. Without reliable child care, parents cannot focus on their work or even hold on to their jobs.
Since 2000, child care costs have increased and the number of children in low-income families has increased, but Congress has frozen federal funding for direct child care assistance. As a result, 250,000 fewer children are receiving child care assistance than in 2000. If Congress accepts the Bush administration’s fiscal year 2007 budget recommendation on child care, in the next five years 400,000 more children will lose child care assistance.
In addition, many states have reduced the number of families eligible for help in paying for child care. They have required parents who are already struggling to pay even more toward the cost of care. They have cut back reimbursement rates for child care providers, forcing them either to make extraordinary sacrifices if they are to continue to serve low-income children, or in many cases to simply shut their doors. They have reduced funds for other initiatives to improve the quality of care, including efforts to boost child care teachers’ education levels and compensation.
Child care advocates are working to reverse recent policies that have scaled back funding, using varied strategies to preserve and expand hard-won investments in early care and education.
One area in which there has been an increase in child care assistance is through the tax system. A new report by the National Women’s Law Center, " Making Care Less Taxing: Improving State Child and Dependent Care Tax Provisions ," evaluated 31 tax provisions in 27 states. The report found that the federal government and 23 states improved their tax credits for child and dependent care expenses over the past four years. Thirteen states now offer refundable child and dependent care credits for lower-income families with limited state income tax liability, up from 10 states four years ago. These improved tax policies meant more families reduced their tax bills or received larger refunds to help pay for the child care they need to be gainfully employed.
The federal tax credit provides up to $2,100 in tax assistance, but because it is not refundable—meaning families whose income is so low they aren't liable for income tax receive nothing—its assistance to lower-income families is limited. In contrast, the top-ranked state tax credits provide significant tax benefits to lower-income families. New York’s credit, which is fully refundable for residents, is worth up to $2,310. Oregon’s refundable Working Families Child Care Credit does not have a dollar limit on the amount deductible for child car expenses, although poor families are unlikely to spend large amounts of money, but rather pay large relative percentages to their income. For example, for a family with $6,000 in child care expenses, Oregon's credit is worth up to $2,400. The report card accompanying the NWLC report puts New York’s child and dependent care credit and Oregon’s Working Family Child Care Credit at the top of the class with grades of A-. But for other states there is still vast room for improvement; most received grades of C+ to F.
Child and dependent care tax credits can help offset the cost of care—which can range from over $3,000 to $13,000 per year. For families with a child between the ages of three and five, child care expenses represent the household’s second or third greatest expense. Families with annual incomes of less than $18,000 spend on average a quarter of their income on child care expenses.
Helping families obtain high-quality, affordable child care will require multiple strategies. It will take a combination of increased federal and state investments in child care and early education and increased federal and state tax assistance for families with child and dependent care expenses, including refundable credits for low-income families. We can afford to make these investments in our families and our nation’s future. In fact, we can’t afford not to.
