Early Childhood

Advocates Coalesce Around Tax Policy Proposals to Support Early Learning

By Christina A. Samuels — January 24, 2017 2 min read
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Reports say the Trump administration is gearing up to make child care affordability part of a comprehensive tax reform proposal, and a coalition of early-childhood advocates want to be a part of that conversation.

The Early Childhood Education Action Tank, which includes organizations such as the First Five Years Fund, PNC Bank, and Goldman Sachs, released a report suggesting several ways current tax law could be changed to help low- and middle-income families pay for high-quality child care and preschool.

Among the suggestions from the group:

  • Make the Child and Dependent Care Credit fully refundable. Currently, the credit is between 20 and 35 percent of the first $3,000 spent on care for one child, and the first $6,000 spent on care for two or more children. However, families cannot be reimbursed for more than their total tax liability. So, the paper notes, “a single parent earning $15,000 and spending $1,200 on child care would only qualify for a $86 credit because that is the total tax he or she owes.” Making the credit refundable, however, would put money back in the pockets of low-income families, and allow them to take full advantage of the credit as higher-income families can.

  • Create parity between higher education and early-childhood education by allowing parents some of the same tax advantages for early care that currently exist for college students. For example, the Lifetime Learning Credit helps individuals pay for tuition and related expenses for higher education. The credit is nonrefundable and worth up to $2,000 per tax return. The Early Childhood Education Action Tank said this credit could be expanded to include qualifying early-education and care expenses.

  • Start a federal program that rewards private businesses for investing in early-childhood programs, modeled after Pennsylvania’s Educational Improvement Tax Credit Program. In Pennsylvania, businesses can receive a tax credit equal to 75 percent of their contribution to an approved entity up to a maximum of $750,000 per year. The money helps pay for preschool for families below a certain income level. A federal program would not have to mirror Pennsylvania’s system exactly, but could still spur greater investment in early-childhood programs than the current charitable deduction.

It’s intentional that the group’s recommendations focused on tax policy, as opposed to making requests for more money from Congress, said Mark Shriver, the president of the Save the Children Action Network. His organization convened the group, which has been working on these proposals since 2015. Tax reform is clearly a priority of the new administration and Congress, he said.

“Are we the number one priority for the legislative branch and the administration? No. But we are pushing for a seat at the table when those decisions are made,” Shriver said.

A version of this news article first appeared in the Early Years blog.