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Louis Jacobson
By Louis Jacobson December 14, 2021

Child care assistance for most families passes House, though not in tax credit form

During the 2020 presidential campaign, Joe Biden promised to ease the burden of paying for child care by means of an $8,000 tax credit. But instead of pursuing that course, his administration has advanced a plan with a different mechanism to achieve much the same goal.

Child care can cost around $10,000 a year for each child, depending on location and age. For families with multiple children in child care, and for low- and moderate-wage earners, child care costs can eat up a substantial portion of their income. While there are existing federal programs to help eligible parents pay for day care, those are intended for low-income earners. 

Legislation backed by Biden to strengthen the public safety net, the Build Back Better bill, would substantially expand funding and eligibility for federal child care assistance. The bill has passed the House and is now under consideration in the Senate. It includes a provision to significantly expand federal funding for child care. 

If passed, the child care provisions could start as soon as 2022, ramping up to full enactment over three years. The preschool program for 3- and 4-year-olds would be free, and eligible parents who need to pay for extended hours of care could get a subsidy. 

For younger children, parents would pay no more than 7% of their family income, a provision that would cover nearly all families earning up to $300,000, according to Democrats' calculations. And families who earn 75% or less of their state's median income could send their children for free. 

The bill would provide subsidies for parents to pay for any child care service that meets state licensing requirements. This could include a child care center, a faith-based program or home-based child care. 

State governments would determine how the new federal funding gets disbursed. The state might decide to give parents the funds to use, or the money may go directly from state coffers to the child care provider, said Karen Schulman, director of state child care policy at the National Women's Law Center.

The mechanism envisioned in the Build Back Better bill has one advantage over the tax credit Biden suggested during the campaign, Schulman said. Under the bill, parents would receive help with their child care costs as they incur them during the year, rather than having to pay up front and then wait until the following year to have some of those costs reimbursed through the tax system, she said.

While critics have raised concerns that the proposal in the Build Back Better bill doesn't adequately protect faith-based child care facilities, there is little question that the provision in the bill would provide a major funding increase to help most families afford child care.

House passage means that Biden's proposal is now before the Senate and one step closer to enactment. Despite the technical differences between Biden's original promise and the language in the Build Back Better bill, we rate this promise In the Works.

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