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Congressman Kevin Yoder

Representing the 3rd District of Kansas

Yoder, Murphy Introduce Legislation to Help Families Struggling with Childcare Costs

Aug 2, 2017
Press Release
Reforms Child and Dependent Care Tax Credit, Enhances Dependent Care FSAs

Washington, DC – Representatives Kevin Yoder (R-KS) and Stephanie Murphy (D-FL) have introduced the Promoting Affordable Childcare for Everyone (PACE) Act, legislation that makes important updates and reforms to the Child and Dependent Care Tax Credit (CDCTC) and Dependent Care Flexible Spending Accounts (FSAs) to help middle class and low-income families pay for care for children and other dependents.

Across the country, the high cost of childcare is a barrier for parents who try to work full time and provide safe, quality care for their children. In many states, the cost of full-time childcare is so high that it rivals the average costs of housing or in-state tuition at public universities. Lower-income families are hurt the most by this, as childcare costs on average make up more than 30 percent of their income.

According to the Economic Policy Institute, the average annual cost of care for one infant in Kansas is $11,201, which comes out to about $933 per month and almost 18 percent of a typical Kansas family’s income. It’s about 26 percent higher than the average cost of renting a home and about 52 percent higher than in-state tuition for a four-year public college. According to their research, childcare for two children – an infant and a four-year-old, for example – costs $19,152, which is about 31 percent of a typical family’s income.

“Paying for quality, affordable care for young children is one of the most important line items on every working family’s budget,” Representative Yoder said. “These days it’s become a larger and larger number, making it more and more difficult for families to find the right solutions, and in some cases even creating a disincentive for both parents to enter the workforce. As we work to reform our tax code in Congress, we’re working on ways to help Americans keep more of their hard-earned money and grow our economy so they can take home even more of it.

“That’s where the PACE Act comes in,” Yoder continued. “We’re modernizing the way the tax code treats childcare expenses by improving access to the childcare tax credit and flex spending accounts. More Americans will be able to pay for the cost of childcare, which means more Americans in the workforce helping our economy grow. It means more opportunity and more prosperity for the families who are the backbone of this country.”

“Raising a family is a blessing, but the rising cost of living has made it far too difficult for working and middle-class families to afford high-quality childcare—that’s why the bipartisan legislation we introduced today is so important,” Representative Murphy, who is herself a mother of two young children, said. “Oftentimes, parents are forced to leave the workforce or cut back on working hours to care for their children simply because they can’t afford expensive childcare. By helping to offset these costs, the PACE Act will help put high-quality childcare and early education within reach for more families.”

“The PACE Act will go a long way in assisting more working families afford the childcare their family needs,” Dr. Elanna Yalow, CEO KinderCare Early Learning Programs, said. “Modernizing the Child and Dependent Care Tax Credit and Dependent Care Flexible Spending Accounts as the PACE Act does will provide critical enhancements desperately needed by today’s low and middle-income working families in affording the quality childcare that parents both want and expect for their children.”

Bill Summary:

The PACE Act makes important updates and reforms to the tax provisions that help families care for children and other dependents. Specifically, the bill:

  1. Improves and modernizes the Child and Dependent Care Tax Credit (CDCTC) by:
    • Making the credit refundable. This change will allow the credit to help low-income working parents, whose low or zero tax liabilities prevent them from benefiting from the current CDCTC.
    • Increasing the value of the credit. The PACE Act raises the credit rate for all families, with a new top rate of 50 percent that phases down to 35 percent for higher-income families
    • Indexing the credit to inflation. This will help the CDCTC keep pace with rising childcare costs in the future.
  2. Enhances Dependent Care Flexible Spending Accounts (FSAs) by:
    • Increasing the amount of pre-tax dollars that families can put into FSAs from $5,000 to $7,500. This money is excluded from gross income and allows families to reduce their tax burden while paying for important care for dependents.
    • Indexing the new cap to inflation so that FSAs are updated steadily and families can save enough money to pay for childcare.

Impact:

The PACE Act will make tangible improvements to American families’ ability to pay for childcare. For example:

  1. Low income family of four making less than $15,000 a year:
    • Current law: receives zero CDCTC benefit.
    • PACE Act: maximum annual CDCTC refund of $3,000 to help pay for childcare.
  2. Middle class family of four making $55,000 a year:
    • Current law: maximum annual CDCTC benefit of $1,200.
    • PACE Act: maximum annual CDCTC benefit of $2,100, which is $900 more to help pay for childcare.

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