This column has been updated.
The Biden administration appears to be taking these lessons to heart. As part of its “American Families Plan,” which costs an estimated $1.8 trillion over a decade, the White House is proposing at least two major expansions of the child-care system. They are intended to improve access and affordability to high-quality care in the near term and to make the entire system more resilient over the long term, should the country again face severe shocks such as those of 2020.
First is the creation of a massive new voucherlike program that would make child care free for all poor children and highly subsidized for middle-income kids. It would apply to children from birth through age 5. The White House estimates that this and related investments in child care would cost $225 billion over 10 years.
Under this proposal, the poorest families would pay nothing out of pocket for child care; families earning up to 1½ times their state’s median income would pay no more than 7 percent of their income in co-pays, on a sliding scale. Parents could enroll their kids at any program licensed by their state — whether a large child-care center, small family provider, Early Head Start, public school program, etc. — and the voucher would be given directly to the provider. The amount providers receive would be determined by the family’s income and a state assessment of program quality, with higher-quality programs eligible for more money per child.
The idea builds upon the Child Care and Development Block Grant, a chronically underfunded program currently available only to lower-income families. The Biden proposal also sounds quite similar to legislation recently reintroduced by Rep. Robert C. “Bobby” Scott (D-Va.) and Sen. Patty Murray (D-Wash.), though that bill would make these subsidies available to children under 13 (rather than just through age 5).
Another prong of the Biden child-care plan involves making permanent the recent expansion of a tax credit that defrays child-care expenses.
The $1.9 trillion legislation that Biden signed in March included a few temporary expansions of various tax benefits. One was the Child and Dependent Care Tax Credit, which working families can claim to partially offset qualifying child-care expenses. The credit has been around for a long time but has been relatively modest compared with the costs families actually pay for care; until recently, eligible taxpayers could reduce their federal income tax liability by up to $600 if they had one child (or other qualifying dependent) or $1,200 if they had two or more kids.
Last month’s legislation made this credit much more generous, though only for a year: It made the credit “refundable” for 2021, meaning families could receive a refund if the size of the credit exceeds their income tax liability. It also expanded the credit to as much as $4,000 for one child or $8,000 for two or more kids. Families earning up to $125,000 could use the credit to offset as much as 50 percent of their child-care costs, with smaller credits available to those earning up to $400,000. The credit can be applied to expenses such as summer programs, after-school care or full-time care, and it is available for kids younger than 13.
Biden is set to propose making this more expansive version of the credit permanent — a useful improvement, and certainly complementary to other things the administration is asking Congress for. But it’s unlikely to make as much of a difference in the lives of lower-income families as other initiatives being announced Wednesday.
That’s because this credit is claimed only once a year, at tax-filing time, after families have already footed the bill for their various child-care costs. Reimbursements later may be less helpful for parents who already have trouble making ends meet. Those child-care vouchers — alongside other initiatives, such as universal pre-K, nutritional support and paid leave — seem likely to have a bigger impact.
I (among others) have been urging the Biden administration to make permanent a different child-related tax credit that was also temporarily expanded last month; that benefit, also known as a child allowance, is expected to soon be issued as a monthly advance payment rather than available only as a lump sum, at tax-filing time. It is likely to make a bigger difference in the lives of families who live paycheck to paycheck.
Unfortunately, Biden is asking Congress to extend key components of this policy only through 2025. But there’s a great amount of support for permanency among Democratic lawmakers, and House Ways and Means Committee Chairman Richard E. Neal (Mass.) introduced legislation Tuesday that would add it to the tax code in perpetuity. Let’s hope the president takes the hint.
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