Two Senate Democrats this month introduced plans to increase the child-care tax credit for middle income families.
Sen. Bob Casey, D-Pa., on March 19 introduced a bill calling for a more generous child-care tax credit for families with children under 5. Earlier in the month, Sen. Patty Murray, D-Wash., along with a small crew of other senators, introduced a bill calling for a similarly more-generous credit for families with children under 13.
Both bills follow President Barack Obama’s proposal of a more generous credit in his 2015 State of the Union address, in which he called child care a “must have” and a “national economic priority.”
Current law allows parents to claim a credit for up to $3,000 spent on child care, per child, for children under 13. The credit offered is 20 percent to 35 percent of the $3,000 depending on family income. However, the credit is only available to families that owe income taxes, meaning they make upwards of $20,000 a year, regardless of family size. That means families making less than $20,000 a year see no benefit.
Casey’s plan would offer a fully refundable tax credit of $3,000 for each child under 5 in families making $120,000 or less annually. That means families could actually get a full $3,000 off their tax bill, not just a percentage of it. Families making more than $120,000 annually would receive a progressively smaller credit, but one that would still be more than double the amount they are eligible for now.
Casey’s plan would expand the number of families with older children who are eligible for the tax credit, but not increase the amount of the credit for those families.
Murray’s plan is very similar to legislation introduced in 2014 by Sen. Jeanne Shaheen, D-N.H., and co-sponsored by Murray and others. The 2014 proposal also predates the president’s call for such a change.
Murray’s plan would also increase the amount of credit available to families and make that credit fully refundable so that it benefits families making less than $20,000. However, Murray’s bill would make the increased credit available to all qualifying families with children under 13.
Murray’s plan would also phase out the credit for families making more than $250,000 a year.
It’s unclear if either bill will make it past the introductory stage in a Republican-controlled Congress.
Casey’s bill can be viewed here, though the full text had not yet been added at the time of publication of this post. Murray’s full bill can be viewed here. And last year’s legislation, which was introduced but never heard, can be viewed here.
For more information, take a look at this explanation of the current child-care and dependent tax credit by the California CPA Education Foundation. Or this post explaining how the new proposals would change the existing tax code, written by ThinkProgress.org in response to Obama’s Sate of the Union proposal.