House Democrats propose child care tax credit expansion

Accounting

Democrats introduced a bill Tuesday to provide tax credits for child care, along with universal paid family and medical leave and permanent extensions of child and family tax credits.

House Ways and Means Committee chairman Richard Neal, D-Massachusetts, led the other Democrats on Congress’s tax-writing committee by introducing the legislation, known as the Building an Economy for Families Act. The bill would provide universal paid family and medical leave for all U.S. workers, guaranteed access to child care, and permanently extend worker and family-related refundable tax credits from the Biden administration’s American Rescue Plan Act, which Democrats passed last month.

Democrats are introducing the bill ahead of President Biden’s address to a joint session of Congress on Wednesday evening, when he is expected to unveil his own proposals for expanding aid to families during the pandemic as part of his American Family Plan, funded by proposed increases in the top income tax rates for the wealthy, capital gains tax rates and an end of the step up in basis for estate taxes. The Biden administration is also working to pass its infrastructure plan, known as the American Jobs Plan, which is funded by increases in the top corporate tax rate.

Democrats on the Ways and Means Committee see their bill as building on those efforts in the eventual post-pandemic economy.

“Our economy is premised on the idea that some workers are worthy of ‘perks’, like paid leave or affordable child care that works for their schedules, while the majority are forced to fend for themselves. For our economy to fully recover from this pandemic, we must finally acknowledge that workers have families, and caregiving responsibilities are real,” Neal said in a statement. “Through sensible, but bold investments, we can put workers’ minds at ease and ready our country to come roaring back, all while lifting millions out of poverty by permanently extending the hugely popular expansions the Ways and Means Committee made to key tax credits in the American Rescue Plan.”

Rep. Richard Neal, D-Massachusetts

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The bill would provide a new refundable payroll tax credit for child care providers to raise the wages of child care workers. It would also permanently extend the American Rescue Plan’s expansions of the Child Tax Credit, the Child and Dependent Care Credit and the Earned Income Tax Credit. The expanded CTC provides $3,000 per child over the age of 6 (or $3,600 for younger children, on a fully refundable basis. The CDCC is also fully refundable and provides up to $8,000 for qualifying child care expenses of up to $16,000. The EITC provides nearly triple the maximum credit for workers without dependents, and includes an important provision to preserve the value of the EITC in case of income disruptions.

The bill would also increase funds for the Child Care Entitlement to States program and index the funds so they could grow with inflation and the child population. It would also establish a Child Care Information Network for parents and caregivers so they could learn the latest information about available child care slots that meet their needs within their local community. It would create a new Worker Information Network to help workers access paid leave, unemployment insurance benefits, and child care. In addition, the legislation would Invest $15 billion in the physical infrastructure of child care facilities.

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