Rochester, NY – U.S. Senator Kirsten Gillibrand (D-NY) announced new bipartisan legislation today that would change the federal tax system to help make child care more affordable and accessible for working parents and families. With a new report confirming that New York families pay the highest child care costs in the country, parents and advocates from across Upstate New York joined Gillibrand to discuss the new push to make the services more affordable.
“While middle class wages remain stagnant child care is now so expensive in this state, that it is rivaling the cost of sending our children to college,” said Senator Gillibrand. “For many families, both parents working, or a single mom going to work to provide for her family isn’t a choice. And no family should have to choose between earning a paycheck or staying home because they can’t afford the child care bills. Congress must come together and take this head-on, and we should start with these three proposals that have one very clear goal – to finally make child care affordable and accessible for our working families.”
The average household income here in Monroe County is only $52,394 and in the City of Rochester even less at $30,875. New York was ranked the least affordable state in the nation for child care, according to a recent report by Child Care Aware. For many families, paying for child care represents a family’s largest monthly expense after housing.
In the Rochester Finger Lakes Region, there were nearly 62,000 families with children under six years old. For a year of child care in a day care center, families spend an estimate of up to $10,851 for an infant, up to $10,244 for a toddler 1.5-2 years, up to $9,620 for a toddler 3-5 years and up to $9,013 for a child age 6-12.
To help low-income and middle class families save more on quality child care, money that would go right back into the local economy, Senator Gillibrand is pushing to more than double the federal child care tax credit and make the credit refundable, allowing working parents to receive a maximum credit of $3,000 for one child, up from $1,050, and put more money back in their pockets. The Senator is also proposing allowing a family to deduct up to $14,000 of qualifying child care expenses, for two children, putting $3,500 back into their pockets. Additionally, Gillibrand will introduce legislation that would increase the amount of money families can contribute to a flexible spending account that is not subject to taxes families can use to pay for child care expenses – saving them hundreds of dollars.
“As one of the leading providers of early childhood education in the Rochester community, we feel strongly that quality childcare in Rochester is critical to the success of our community as a whole,” said Lynn Lubecki, MS Ed., Ed.D, Rochester Childfirst Network Executive Director/CEO. “As practitioners, we place a strong emphasis on evidence-based professional development for our teachers and staff, and engage in continuous improvement practices on an ongoing basis. We believe that child care is not a perk, but an essential service for thousands of working families who rely on quality early childcare for their child’s first 3-5 years of development—the most critical time of development in a child’s life.”
“High quality care and education is so important for children – for all children. But it’s expensive. Here in Rochester, families can easily pay $12,000 a year for quality care – almost double the cost of SUNY tuition!,” said Carolyn Lee-Davis, Policy Director at The Children’s Agenda. “We know that many working families already have budgets that are stretched to the limit. Families are then caught in the impossible situation of finding care that they can afford so that they can stay working. This often results in children being placed in lower quality, less stable, and sometimes unsafe, environments. By recommending these critical improvements to the tax provisions for child care costs for working families, Senator Gillibrand is supporting working families -families that have middle incomes and families that have low incomes – helping parents stay at work while being able to better afford the high quality care that is best for their children, getting them ready for school and life.”
Rochester Business Alliance President and CEO Bob Duffy said, “Rochester Business Alliance appreciates Senator Gillibrand’s leadership on this important community issue. Affordable, high-quality child care benefits both the work force and employers. Parents are more focused at work knowing their children are safe and cared for, while employers see fewer absences and less employee turnover. The Rochester Community Coalition, convened by Rochester Business Alliance, has recognized the importance of child care to working families and employers and has included the issue in its annual state advocacy agenda in the past. RBA is also pleased to see the federal government take an active interest.”
Expanding the Dependent and Child Care Tax Credit (DCTC)
Senator Gillibrand is working to more than double the Dependent and Child Care Tax Credit (DCTC). Currently, the child and dependent care tax credit is worth a maximum of 35% of child care expenses, up to $1,050 per child or $2,100 for two children. The credit applies to any child under the age of 13 and to disabled dependents of any age. The Right Start Child Care and Education Act would increase the maximum credit from $1,050 to $3,000 per child, by raising the percentage of the tax credit to 50% and doubling eligible expenses. The legislation also makes the tax credit fully refundable, allowing low-income families with no tax liability to receive the full benefit.
For example, under current law, a New York family with two children earning $30,000 a year, receives a credit of $1,620 ($810 per child). Under the Gillibrand proposal, which would make the tax credit refundable, the same family with two children could receive a maximum credit of $6,000 ($3,000 per child).
This legislation would also encourage more New York businesses to provide on-site child care services for their employees by providing employers with a tax deduction worth 35 percent of the cost of creating these facilities. Currently, employers can only deduct 25 percent of their costs.
Creating a New Child Care Tax Deduction
Today, Senator Gillibrand will introduce the Child Care Deduction, which would allow middle-class families to deduct the cost of child care from their taxes as a business expense. The legislation would create a new tax deduction, allowing families to deduct as much as $14,000 a year for child care expenses ($7,000 for one child).
Families would have the option of choosing an above-the-line deduction to help mitigate the high cost of child care. After all, child care expenses are necessary, non-optional costs to families with working parents that cannot forfeit needed wages.
For example, under current law, a family with two children earning $100,000 can receive a maximum credit of $1,200. Under the Gillibrand proposal, this family spending $14,000 a year on child care expenses could deduct the full amount, therefore, lowering their taxable income by $3,500.
Child and Dependent Care FSA Enhancement Act
Senator Gillibrand will introduce the Child and Dependent Care FSA Enhancement Act, which would increase the amount of money not subject to taxes that families can contribute to a flexible spending account used to pay for child care expenses. Gillibrand’s new legislation would increase the pre-tax contribution level from the current $5,000 to $7,500, saving New York families hundreds of dollars on child care.
For example, under current law a married couple making $80,000 will save $1,250 in Federal Taxes (25 percent of $5,000) if one parent contributes $5,000 to a dependent-care FSA account. Under Gillibrand’s new proposal, the same couple will save $1,875 in Federal Taxes (25 percent of $7,500) if one parent contributes $7,500 to a dependent-care FSA account.