Working Parents Will Suffer If Federal Child Care Credit Sunsets
Working families in West Virginia could see less child care support next year. If Congress doesn't take action before January, the federal Child Care & Dependent Tax Credit (CCDC) will revert to its 1990s form, reducing the amount of child care assistance parents receive across the board.
Currently, the CCDC reduces the total tax bill of working parents, depending on income, family size, and child care costs. In very few cases, this can amount to as much as $1,050 for one child and $2,100 for two or more children. The maximum credit for families with yearly earnings of $43,000, however, is $600 for one child and $1,200 for two or more children.
These amounts are already meager when compared to average child care costs around the state, but the situation could become even worse if Congress allows the good provisions of the Economic Growth Tax Relief Reconciliation Act (EGTRRA) to sunset.
This would result in an inferior CCDC that reduces the lowest income bracket from $15,000 and less to $10,000 and less and the upper bracket from $43,001 and up to $28,001 and up. The maximum possible credit would also regress to $720 for one child and $1,440 for two or more children. All families who use child care would experience these reductions in child care assistance, which could amount to over $800 in some instances.
The following table shows the cutback in child care assistance working families could endure in the very near future.
Child care is a necessary cost of employment. Affordable child care not only helps parents gain and maintain employment, it creates jobs in the child care sector, stimulates other sectors of the economy, and provides crucial developmental benefits and safe environments for West Virginia's children. According to the U.S. Census Bureau's American Community Survey (2006-2008), there are nearly 170,000 households in West Virginia with children under the age of 13. Over 76,000 of these families are living at 200 percent of the federal poverty level or below, likely struggling to meet basic needs like child care, often despite full-time employment.
State policymakers should monitor this situation closely and consider keeping pace with the 27 other states (including most of West Virginia's neighbors) that have state child care tax provisions by creating a state child care tax credit. A state credit should complement the federal CCDC and effectively target working families who need child care so they can work - and work so they can afford child care.