WATERVILLE, ME – U.S. Senator Angus King (I-Maine) today visited Educare Central Maine, a state-of-the-art early learning center, where he underscored the importance of affordable childcare for working families across Maine and the country. During the visit, Senator King spoke with parents and childcare professionals about the Promoting Affordable Childcare for Everyone (PACE) Act, bipartisan legislation he re-introduced with Senator Richard Burr (R-N.C.) that would update the Child and Dependent Care Tax Credit to make it more useful to American families.

“The high costs of childcare can make it difficult for many parents to balance the responsibilities of work with the responsibilities of their family. Some parents who want to work may even have to forego job opportunities to stay at home, or seek substandard care, because of these high costs,” Senator King said. “It’s time that Congress step up and lend working parents a hand by updating an existing federal tax credit to bring it into line with the realities faced by parents today. Doing so will help parents and help our economy.”

For too many families, the cost of childcare can make it difficult to maintain employment and make ends meet. In nearly half of the country, the annual cost of full-time childcare for a 4-year old is greater than the average cost of in-state tuition at a 4-year college or university. Those pressures are felt most by low-wage workers who spend on average more than 30 percent of their income on childcare.

While the federal government provides two significant tax benefits to help offset childcare costs – the Child and Dependent Care Tax Credit (CDCTC) and Dependent Care Flexible Spending Accounts (FSAs) – they are both in need of an update. For example, neither policies have kept pace with inflation, meaning they have become less useful over time as the cost of childcare increases.

The PACE Act would enact several changes to make both tax policies immediately more generous and modify them to reflect the changing economic landscape by requiring an annual inflation adjustments that will provide working parents with greater purchasing power when seeking care for their children. Because both tax provisions affect care for the elderly and individuals with disabilities, those enhanced benefits will extend to them as well.

More specifically, the legislation would:

1. Modernize the Child and Dependent Care Tax Credit by:

• Making the credit refundable in order to expand the credit’s reach to low-income working parents
• Increase the value of the credit by raising the credit rate for families of all income levels and creating a new top credit rate of 50 percent that phases down to 35 percent for higher-income families in order to expand the reach of the credit and put more money back into the pockets of working parents
• Indexing the credit to inflation to ensure the value of the credit will not be eroded over time by rising childcare costs, but instead, will remain at a sufficient level to help make costs more affordable.

1. Enhance Dependent Care Flexible Spend Accounts (FSAs) by:

• Increasing the amount of pre-tax dollars families can put into these accounts from $5,000 to $7,500. This exclusion from gross income allows families to save money on income and FICA taxes, and the PACE Act’s increase means those savings will go even further than current law’s.
• Indexing the new cap to inflation so FSAs can keep pace with the cost of childcare. Because the current $5,000 cap is not indexed to inflation, families are falling further and further behind the rising cost of care.  By raising the cap to $7,500, and indexing that amount to inflation, the PACE Act ensures FSAs are reliably updated to keep steady a parent’s purchasing power for their child’s care.

The legislation has been endorsed by the Maine Children’s Alliance, First Focus Campaign for Children, National Association for the Education of Young Children, and the Save the Children Action Network.

To read a copy of the legislation, click HERE. To read a one-page summary of the legislation, click HERE. Senators King and Burr introduced a similar piece of legislation last year.

Following his visit to Educare, Senator King will join Colby College President David A. Greene for a walking tour of Main Street in downtown Waterville to survey Colby’s ongoing economic revitalization work with community partners and to learn more about the College’s future plans.

Later in the evening, Senator King will deliver the George Mitchell Distinguished International Lecture at Colby College in Waterville where he will speak about U.S. foreign policy.

Photo 1: Senator King reads to children at Educare Central Maine.

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