On July 31, Senator Tim Kaine (D-VA) and Senator Katie Britt (R-AL) introduced two bipartisan child care bills that aim to ease the burden of child care costs for families, encourage businesses to support additional child care supply, and support the child care workforce. CCAoA supports Senator Kaine and Senator Britt’s bills and applauds their bipartisan effort to strengthen the child care system.
CCAoA’s recent child care supply and affordability data highlights how critical it is to make these improvements to the child care system now. While the number of child care centers rebounded to pre-pandemic levels in 2022, the supply did not continue to grow in 2023. In addition, the national average price for child care rose 3.7% to $11,582 from 2022 to 2023 – a price that exceeds many families' household expenses like rent. Child care is so expensive that it takes 10% of a married couple with children’s median household income or 32% of a single parent with children’s median household income to afford a year of child care at the average national price.
The Child Care Availability and Affordability Act modernizes three existing child care tax programs to lower the burden of child care costs for parents and businesses looking to provide child care.- Child and Dependent Care Tax Credit (CDCTC) - The proposal in this bill would increase the size of the CDCTC and make it refundable, which would mean that lower-income families with out-of-pocket child care expenses could receive help from the credit even if they don’t have a tax liability. Refundability was temporarily offered as a part of the American Rescue Plan Act in 2021, but the policy expired. The Child Care Availability and Affordability Act would expand the maximum CDCTC to $2,500 for families with one child and $4,000 for families with two or more children. It would increase the percentage of expenses deductible to 50% (currently 35%) and increase the max creditable expenses to $5,000 for one child or $8,000 for two or more (currently $3,000 and $6,000). Evidence shows that this policy change puts child care support in the hands of more families - under the temporary expansion, nearly 6.4 million families received the CDCTC as a part of their 2021 tax returns, 1.2 million more families than received the CDCTC in 2020.
- Dependent Care Assistance Program (DCAP) - DCAP is a flexible spending program some employers offer. The Child Care Availability and Affordability Act proposes strengthening the DCAP program to allow families to deduct 50% more in expenses (up to $7,500). Importantly, it also decouples the DCAP from CDCTC to allow eligible families to benefit from both when their child care expenses exceed the DCAP threshold.
- Employer-Provided Child Care Tax Credit (45F) - The proposal in this bill would bolster the underutilized Employer-Provided Child Care Tax Credit (often referenced as 45F), which encourages businesses to provide child care to their employees by setting up and running facilities, providing financial support, or offering child care resource and referral services. The bill would increase the maximum credit to $500,000 (up from the current level of $150,000) and the percentage of expenses covered to 50% (up from 25%). The bill also includes a larger incentive for small businesses.
Many families use the CDCTC to offset the high cost of child care. Making the CDCTC fully refundable is critical to supporting low-income families. The proposals in this legislation show bipartisan support for protecting and improving tax credits that lower child care costs for parents and businesses as one strategy to improve child care affordability. CCAoA encourages Congress to do so alongside sustainable investments in the child care system.
The Child Care Workforce Act would authorize a pilot program to provide wage supplements to child care workers. States, localities, Indian Tribes, and Tribal organizations that receive a grant could provide supplements to both home-based and center-based child care providers licensed by the state. The bill also requires an evaluation of the pilot program's impacts on turnover, quality of child care, availability of affordable child care, and reduced financial burden on child care providers.
Child care wage supplements are a strategy that works to stabilize and grow the child care system – as do increases in rates, improvements to provider payments, and grants to child care programs. CCAoA encourages Congress to support the strategies in this proposal, and other strategies to strengthen the child care workforce so that there is sufficient child care supply for the families who need high-quality child care across the country.
CCAoA appreciates Senators Kaine and Britt’s leadership in addressing the shortages of child care supply and the cost burden on families.
