President Obama’s recent State of the Union highlighted the financial struggles of Rebekah Erler – a middle-class mother of two from Minneapolis whose childcare costs nearly exceed annual tuition at the University of Minnesota. In Brooklyn, Yvette Nunez had to quit her job to take care of her three kids, unable to cover the crippling cost of day care.
Their experiences reflect those of families throughout the country. The cost of childcare has increased by 70% over the last three decades, placing particular strain on low-income working families who now spend about 40% of their total income on care for their kids. Pew Research Center cites these costs as one of the likely reasons for the rising share of stay-at-home mothers. Many moms simply cannot afford to work.
To alleviate this burden, President Obama has proposed vital expansions to existing childcare tax credits and subsidies. The Child and Dependent Care Tax Credit (CDCTC) currently provides a maximum tax credit of $1,050 per child. However, only those earning up to $15,000 annually qualify for the maximum amount, with middle-class families restricted to a $600 per child credit. This minimal credit offers little assistance to a family paying the national average of $10,000 per year to enroll their infant in a childcare center. President Obama’s plan would triple the maximum credit for families with children under five to $3,000 per child, and expand eligibility for the maximum amount to those earning up to $120,000.
It would additionally increase funding to the Child Care and Development Fund (CCDF). The program subsidizes quality childcare options for families earning up to 85% of their state’s median income, but demand for funds currently far exceeds supply. The White House’s plan would enhance the CCDF’s reach from 1.6 million to 2.6 million children, ensuring access to subsidized care for all low- and moderate-income families with children under four years of age.
These expanded programs would not only mitigate rising costs for families like Rebekah’s and Yvette’s, but would also benefit the national economy. Child Care Aware of America, the nation’s largest childcare advocacy group, reported that US businesses lose $3 billion annually due to childcare-related employee absenteeism. In December 2014, the White House Council of Economic Advisors concluded that every $1 spent on expanding early learning programs would provide $8.60 in benefits to society. The return on investment comes from greater parental earnings, diminished need for remedial education, and increased incomes for children when they grow up.
Unlike President Obama’s other State of the Union proposals, the childcare plan is likely to garner bipartisan support in the Senate and House. Speaker Boehner summarily rejected the White House budget during a recent 60 Minutes interview, but said childcare reform was “certainly something we’d look at.”
Congress should act quickly to raise childcare tax credits and subsidies while the issue remains atop the political agenda. The programs would benefit the economy and advance early-learning opportunities for the children of lower- and middle-class families throughout the country.