A Waiting Game: Prioritizing Child Care in the U.S.
– By Whitney Coble
American families place a high priority on child care. In fact, 68% of Americans believe that the government or private sector should assist working parents by offering additional funding for child care. Currently, more than 15.3 million children under age six in the United States are in need of child care. In order to fill this need, the U.S. government provides child care assistance through tax credits and subsidies for low-income families.
Families may choose between two types of tax relief for care-related expenses. The Child and Dependent Care Tax Credit (CDCTC) is a nonrefundable credit of up to 35% of qualifying expenses to help cover the cost of care for children under the age of 13. Another option, Flexible Spending Accounts for Dependent Care (FSA), enables some employees to set aside a maximum of $5,000 pre-tax dollars per year to pay for child care.
The federal government also provides direct child care subsidies for low-income families through the Child Care Development Block Grant Fund (administered by the states with limited state funding) and offers child care funds from the Temporary Assistance for Needy Families program (TANF). In order to qualify, a family’s earnings must usually fall below the state’s median income to qualify. Despite this, federal child care policies often do not have the intended impact on low-income families.
The tax benefits available for care-related expenses are miniscule in relation to the cost of child care and are not accessible to many low-income families. To be eligible for the tax credit, both parents (if married) must have earnings, be in school, or be disabled. Therefore, middle and high-income workers and families reap the primary benefits, while low-income families who do not earn enough to pay taxes cannot receive the credit because it is nonrefundable. Also of disadvantage to low-income workers, FSAs primarily go to professional-managerial families because employers must elect to utilize them.
Moreover, the subsidies provided through the block grant restrict assistance due to limited federal and state funds. Only about 30% of low-income families using center-based care and 16% using an in-home care center for a child under the age of six receive subsidies. An analysis of ten states, found that no more than half of those eligible received the subsidy in any state. Low subsidy levels especially limit the pay and benefits of care providers who are women of color. However, a national conversation is emerging that offers hope for improved child care policy in the future.
To provide safe and enriching child care that families can afford, both the federal child care subsidy programs and federal tax policy related to child care need to be improved. Mark Greenberg, executive director of the Task Force on Poverty for the Center for American Progress, suggests tax credit expansions that are likely to cost about $5 billion a year plus subsidy and quality expansions costing about $18 billion a year. Additionally, Greenberg advocates the federal dependent care tax credit be refundable, “with the credit set at 50 percent of covered child care costs for the lowest-income families and gradually phasing down to 20 percent as family income increases.” Regarding subsidies, Greenberg suggests replacing the block grant with a “federal guarantee of assistance for all families with incomes under 200 percent of poverty that need child care to enter or sustain employment.” The federal government would pay a majority of the cost and administer the program under a federal-state matching formula.
Greenberg’s suggestions offer a promising long-term strategy; however, states can make other improvements to child care assistance programs in the near future. First, state legislators should not transfer funds from other federal grants into the child care subsidy funding stream. This habit hides the impact of funding cuts, making it easier for lawmakers to ignore the significant repercussions of not improving child care assistance programs. Second, lawmakers need to ensure that payments to high-quality child care providers are increased in accordance with rising living costs. Moreover, they need to create additional state regulations for child care providers to ensure a safe environment for children.
Some parents leave paid employment or school to care for their children, choosing to forgo the child care subsidy system, instead of sticking with low-quality child care programs. If women feel more comfortable with the quality of child care available, they are more likely to take advantage of government assistance that allows them to pursue employment opportunities. Women continue to be the primary care providers; therefore, it is essential not only for children, but for women, that federal child care policies continue to improve.
Whitney Coble is due to graduate in May 2014 with a M.S. in Public Policy and Management from the Heinz College and a J.D. from the University of Pittsburgh School of Law. Her primary research interests include economic development, social impact bonds, and education policy.