Buffalo, 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.”
In 2012, the estimated median household income for Erie County was $50,653, and in the City of Buffalo, even less at $30,942. 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 Western New York, there were nearly 68,000 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 $10,365 for an infant, up to $9,802 for a toddler 1.5-2 years, up to $9,230 for a toddler 3-5 years and up to $8,667 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.
“Child care helps both children and families prosper,” said Kimberly Pardee. “It gives children the ability to learn and develop skills they need to succeed in school and in life while giving parents the support and peace of mind they need to be productive at work. With that being said, the cost of quality child care is so significant that it often impedes on a parent’s ability to make the best decision for their family and instead forces them to choose the option they can afford. Senator Gillibrand’s proposed legislation would expand the possibilities for families and help them to lead economically secure, healthy and fulfilled lives!”
“More than 95,000 children in Erie County have working parents, so child care is a critical issue in our region,” said Lynn Pullano, Ed.M., Child Care Resource Network Chief Executive Officer. “With nearly 90% of brain and personality development occurring before age five, it is tremendously important that our children have access to high-quality care and learning environments that positively affect their capabilities. Affordability is the number one barrier that families face when finding options for care. Any assistance that can ease the burden of high child care expenses will benefit our children and our entire community, now and in the future.”
“In my 30 years of leadership in services to children and families, I can say child care is one of the first and the most powerful influence on children and their parents and has had the least financial support,” said Deborah Merrifield, Executive Director of the Family Help Center. “I applaud the proposed changes by Senator Gillibrand and her championing the cause of those who have the least influence on public policy, small children and their often young and financially strapped parents.”
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.