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All children need safe, nurturing and stimulating environments to thrive. Since about 61 percent of young children are regularly cared for outside of the home – by relatives, in day cares or at child care facilities – these settings have received increased attention over the years. Additionally, as a result of participating in high-quality early care and education programs, it has been shown that poor children experience positive social and emotional development and later school success. Increasing access to quality and early care and education is an effective strategy identified by CSSP for improving early grade-level reading. 

But access to high quality early childhood programs is a particular challenge for low-income and minority families who can neither find nor afford high quality opportunities in their communities. These families, especially those headed by single mothers, may find the costs associated with quality child care prohibitive. In some states, a single mom might spend well more than 20 or even 30 percent of her salary on childcare. Even in two parent households, this is a tough decision: is it worth it to find employment with such a large added expense as a result? For parents with low levels of education or criminal histories, for whom the labor market is not very forgiving, the answer to that might very well be no. Or, if they do work, parents are unable to pay much for child care and end up utilizing informal arrangements with relatives or friends.

So what can we do?   

With some relatively minor changes to the existing Child and Dependent Care Credit, Dr. James Ziliak of the Center for Poverty Research at the University of Kentucky, proposes a way to both support low-income workers and improve outcomes for children. Specifically, in a recent paper for the Hamilton Project at the Brookings Institution, Dr. Ziliak proposes the following changes to the Child and Dependent Care Credit:

1. Convert to a refundable credit
• Refundable credit base of $4,000 for first child; $6,000 max
2. Convert to a variable credit rate dependent on child age
• Two categories: children under age 5 and children 5-12 years old
3. Institute a household income limit at $70,000 annually
4. Vary the credit by type of child-care provider
• Two categories: licensed vs. unlicensed facilities

The benefits associated with these changes are profound in their simplicity. At the very basic level, offsetting the cost of child care through a refundable tax credit could encourage greater labor force participation by working parents. And while there are still limits to the amount which can be claimed under the proposed changes ($4,000 for the first child; $6,000 max) this would still increase the disposable income of low-income working families, leading to more resources for households with children. With such high levels of child poverty in this country, every little bit helps.

While the disposable income for families would increase, the proposed Child and Dependent Care Credit would be dedicated funds to cover the cost of child care. Varying the credit by child age and provider type, provides  parents with more reimbursement for expenses related to center-based child care – 100% for children under five years old – as opposed to informal home-based arrangements. This movement of children into high-quality centers will result in improved cognitive development and early learning.

The proposed changes would make the Child and Dependent Care Credit a progressive tax and redirect tax expenditures from the top of the income bracket towards the bottom in such a way that directly addresses the issue of income inequality.  This in turn creates the opportunity for upward mobility for low-income families by making work more convenient for the parents and high-quality center-based child care more affordable for the children. 

For more information on ways to support early healthy development read the CSSP report Results-Based Public Policy Strategies for Supporting Early Healthy Development or visit PolicyforResults.org.