Legislation to Provide Financial Relief for Families

Last week, Sens. Mazie K. Hirono, Bob Casey (D-Pa.), and 18 of their colleagues reintroduced the Child and Dependent Care Tax Credit Enhancement Act. The bill would increase the Child and Dependent Care Tax Credit and make it available for more working and middle class families while allowing for parents who are married and filing separately to claim the credit as well.

“For too many working parents in Hawai‘i the inability to access to quality, affordable child care has serious consequences for them and their families,” Sen. Hirono said. “Child care expenses are one of the largest expenditures for families in Hawai‘i—in many cases second only to housing expenses. Providing families with a break on these expenses will allow parents to balance their responsibilities outside of the home while ensuring the health, safety, and development of their keiki.”

“All children deserve the chance to learn and succeed, regardless of where they are born or their family’s income,” Sen. Casey said. “That is why it is so important that we ensure all families have access to high quality, affordable early learning and childcare. This measure works to help achieve that goal by making common sense improvements to the existing Child Care Tax Credit, including increasing the full tax credit amount, and by making the full credit available to more working families. I am proud to be joined by 20 of my Democratic colleagues in this fight.”

The Child Care and Dependent Credit Enhancement Act, which Sens. Hirono and Casey introduced last Congress as well, would improve the Child and Dependent Care Tax Credit by increasing the full credit, making the credit fully refundable, expanding the credit to more families, and indexing the credit for inflation to make sure that benefits keep pace with inflation.

In its Roadmap to Reducing Child Poverty, the National Academies of Science specifically notes that making the Child and Dependent Care Tax Credit fully refundable is a key component to significantly reducing child poverty. As it currently stands, very few families receive meaningful benefit from the credit, because the credit begins to phase out for those with incomes over $15,000 and the credit’s expense limits and income scales have not been indexed to inflation. Restructuring the tax code to make the full credit available for families with incomes up to $120,000 would support better access to quality, affordable child care.

The annual average cost of daycare for children up to age four is $9,589, and for families earning the national median income, the average cost of care for just one child under five amounts to 18 percent of their income. For families in lower income brackets, the cost of child care alone can climb as high as two-thirds of their pay. With wage growth stagnating and child care expenses growing more rapidly than inflation, child care continues to place a major financial burden on American families, especially those with average and lower incomes.

For families in Hawai‘i, child care expenses have increased, on average, by 24% over the last decade, with many families expected to pay over $8,000 for child care every year. According to a 2018 report by Child Care Aware of America, nearly half of Hawai‘i’s children under the age of six lack access to child care, resulting in a shortage of 30,000 certified child care slots in the state.

In addition to Sens. Hirono and Casey, the Child and Dependent Care Tax Credit Enhancement Act is cosponsored by U.S. Sens. Patty Murray (D-Wash.), Ron Wyden (D-Ore.), Sherrod Brown (D-Ohio), Benjamin L. Cardin (D-Md.), Maria Cantwell (D-Wash.), Kirsten E. Gillibrand (D-N.Y.), Maggie Hassan (D-N.H.), Patrick Leahy (D-Vt.), Bob Menendez (D-N.J.), Debbie Stabenow (D-Mich.), Catherine Cortez Masto (D-Nev.), Amy Klobuchar (D-Minn.), Chris Van Hollen (D-Md.), Richard Blumenthal (D-Conn.), Michael F. Bennet (D-Colo.), Sheldon Whitehouse (D-R.I.), Jeff Merkley (D-Ore.), and Jack Reed (D-R.I.).

In February 2019, Sens. Hirono, Murray, and Casey introduced the Child Care for Working Families Act, which would expand access to quality, affordable early childhood programs for working and middle class families, such as increasing funding for the Child Care Development Block Grant and Head Start programs and improving compensation and training for child care workers to give teachers and caregivers full and fair compensation.

The full text of the Child and Development Care Tax Credit Enhancement Act is available here.