The President used April 15, tax day to highlight his proposed expansion of a child care expansion proposal first unveiled in January. The President called for an expanded child care credit which is designed to compliment and wrap around federal child care funding. The current child care tax credit would be expanded for families with children under 5 years of age with a maximum tax credit of $3,000 per child based on a claim of 50 percent of the cost of child care up to $6,000 of for each child. The maximum credit would be available to families with income up to $120,000. The credit would build on the President’s proposed increased child care subsidies because it would remain non-refundable, which means that families with incomes too low to owe federal income taxes would not benefit from the credit but those are the families most likely to benefit from the expanded CCDBG funding.
Under current law families with children under age 13 are eligible to claim a maximum credit of $1,050 for one child and $2,100 for two or more children. The maximum credit is based on claiming up to 35 percent of the cost for the first $3000 in child care expenses for one child and $6,000 in expenses for two or more children. The maximum credits of $1,050/$2100 are available to families with incomes up to $15,000 as it is gradually reduced as income increases.
While the President discussed national tax credits for child care, the National Women’s Law Center unveiled a new report, Extra Credit: How Louisiana Is Improving Child Care that analyzed the impact of a series of tax credits in the state of Louisiana on child care and child care quality. The report which examined the Child Care Provider Credit , the Credit for Child Care Directors and Staff, the Child Care Expense Credit, the Business-Supported Credit, and the Resource and Referral Agency Credit.
The report found that between 2008, when the credits took effect and 2011 the credits resulted in millions of dollars in new investments in child care quality and that there were measurable improvements in the quality of child care in Louisiana, including for low-income children.
In releasing the report, NWLC did highlight that the credits are an important strategy to help families access higher quality child care but that they are one part of a comprehensive child care strategy and pointed out that benefit has been limited because of cutbacks in child care assistance funding.