How does the government support child care?

Published on November 20th 2019

Government-sponsored child care is getting more national attention because of Democrats on the 2020 campaign trail.

Several candidates have released spending plans that include funding for child care. Mayor Pete Buttigieg’s proposal calls for $70 billion per year for child care and education. Senator Elizabeth Warren says her universal child care plan would mean free care for some families and affordable care for the rest. Senator Bernie Sanders has pushed for a nationwide child care program from six weeks of age until kindergarten. Sanders also co-sponsored the Child Care for Working Families Act along with Warren and Senators Cory Booker and Amy Klobuchar, plus Senator Kamala Harris, who is no longer in the race.

The US is home to 53 million children under the age of 13, including 24 million under the age of five, and the government currently administers several programs to assist families with child care. Any new government programs (or changes to existing ones) would impact millions of working parents seeking care for young children.

How does the government help with child care?

Child care vouchers

The government provides vouchers to pay for child care for children under age 13. In 2017, the most recent year of data, 796,000 families with 1,316,900 children were given vouchers from the Child Care and Development Fund (CCDF).

Parents received vouchers for 2% of all children under 13. In order to qualify, parents must be low-income and either employed or in school. The vouchers come with a co-pay for most families; 75% of families paid a copay in 2017. The average copayment was 7% of family income, in line with the amount recommended by the Department of Health and Human Services.

Tax credits

The US offers several tax credits that help families pay for child-related expenses, including child care: the Child and Dependent Care Tax Credit, the Child Tax Credit, the Additional Child Tax Credit, and the Earned Income Tax Credit.

In 2017, the most recent year of data available, the combined value of these tax credits was $119 billion.

Tax returns with children claiming child-related tax credits

Child tax credit

The Child Tax Credit provides $2,000 for each child in households making less than $200,000 for single-parent households or $400,000 for married-parent households. Tax filers need to earn at least $2,500 per year in taxable income to qualify.

If the value of the child tax credit is greater than the income taxes owed by a tax filer, they may be eligible for a refundable credit known as the additional child tax credit. A refundable credit is money that a tax filer may receive back in a tax refund, if the value of the credit exceeds the amount of taxes paid.

Child and Dependent Care Tax Credit

Tax filers may take a credit for a percentage of up to $3,000 of expenses for one dependent or $6,000 for two or more dependents depending on their taxable income. This credit is not refundable, meaning a tax filer cannot receive the excess if the value of the credit is higher than taxes paid, and the filer must be receiving wage income to qualify.

Earned Income Tax Credit

The Earned Income Tax Credit is available to any working tax filer making under the income limit. However, the value of the tax credit increases significantly for tax filers with children. The maximum credit for someone with no children is $519, while for one child it is $3,461 and up to $6,431 for three or more children.

Early childhood education

One alternative to paying for daycare is enrollment in preschool and early education programs. According to the National Center for Education Statistics, the percent of young children enrolled in public education programs has increased, from 26% of three- to five-year-olds in 1970 to 46% in 2017.

An increasing number of states offer public preschool programs for three and four year-olds before they begin kindergarten. The federal government supports these state programs through the Preschool Development Grant competition.

Percent of children enrolled in public preschool programs

Read our report to learn more about early childhood education

The government also funds Head Start, a program which prepares children ages five and younger to enter school and includes early learning programs. The implementation of Head Start varies based on state and local program design.

In 2018, almost 900,00 children were enrolled in Head Start, accounting for 4% of all children five years and younger.

Head Start enrollment

How does child care impact working families?

Households with two working parents or a single parent have increased. According to the Department of Education, 60% of children ages zero to five have at least one weekly nonparental care arrangement and 39% of families report difficulty finding child care. Families state the top challenges with care are cost and lack of available spots at quality facilities.

The Department of Health and Human Services recommends child care cost no more than 7% of a household’s income. However, care options often exceed this limit. The national average cost-per-hour is $7.37 at a child care center, $8.29 for in-home care such as a nanny, both of which cost more per hour than the federal minimum wage, and $5.02 for care in another’s home.

Prohibitive child care costs impact participation in the workforce. According to the Bureau of Labor Statistics in 2016, among people 25-54 years old who were working part-time involuntarily (meaning they would work more if they could) 10% cite child care issues as the reason. This is an increase from 1994, when this survey was first created, when 8% cited child care as the reason.

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Sources

Bureau of Labor Statistics

Department of Education

Department of Health and Human Services

Internal Revenue Service