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March 12, 2019

King, Burr, Murphy, Smith Continue Fight for Affordable Childcare

Bipartisan PACE Act would update tax credits to make childcare affordable for low- to middle-income families

WASHINGTON, D.C. – U.S. Senators Angus King (I-Maine) and Richard Burr (R-N.C.), and U.S. Representatives Stephanie Murphy (D-Fla.) and Jason Smith (R-Mo.) today reintroduced the Promoting Affordable Childcare for Everyone (PACE) Act, bipartisan, bicameral legislation that would update federal childcare tax credits to help American families better access affordable, high-quality care for their children. The legislation would make several changes to the Child and Dependent Care Tax Credit (CDCTC) and Dependent Care Flexible Spending Accounts (FSAs) to make both policies immediately more generous, and ensure they evolve by implementing annual updates to provide families with greater spending power when seeking care for their children.

“No parent should have to choose between ensuring their child receives high-quality care and keeping their job or putting food on the table,” Senator King said. “But too often today, the soaring costs of childcare can force families to make these difficult decisions that jeopardize their financial stability; the annual cost of full-time childcare is roughly the same as a year of tuition at an in-state university in some cases. It’s high time we modernize the federal government’s childcare tax credits and help American families access affordable, first-rate care for their children.”

“The Child and Dependent Care Tax Credit and Dependent Care Flexible Spending Accounts make a big difference for working parents, but our current benefits haven’t kept pace with the rising cost of childcare,” Senator Burr said. “We need to modernize these tax credits to reflect rising costs and to give working parents the flexibility they need to make the best decisions for their families. Supporting working parents and children is a bipartisan issue, and one this Administration has made a priority. I hope our Senate colleagues will join us in finally passing this necessary bill.”

“For far too long, working families have struggled with the rising costs of child care. Our tax code should reflect our priorities, and one of our top priorities must be our children,” said Representative Murphy. “I’m proud to help lead this bipartisan effort to help parents better afford child care – giving more children a fair shot while growing the middle class.” 

“It seems today that daily childcare costs rival the price of sending your child to college,” said Representative Smith. “With the rising costs of care, all too often working families have to make the tough decision about which parent will leave the workforce to stay at home with a child.  The PACE Act will go a long way toward helping lower-income and working families provide quality care for their children.”

“Helping American families pay for child care is one of the best investments our country can make. The PACE Act supports children and parents by ensuring access to quality early childhood care and education while parents are participating in the workforce,” said Mark Shriver, CEO of Save the Children Action Network. “The PACE Act would provide families with the opportunity to invest in their child’s future, particularly for children living in poverty who lack an equal opportunity to succeed. Making the Child and Dependent Care Tax Credit fully refundable and adding more value to it are critical to help low-income families provide their children with a strong start in life.”

“Child care is not a luxury for American families—it’s a necessity,” said First Five Years Fund executive director Sarah Rittling. “Yet the costs associated with quality child care now exceed most other expenses faced by families. The reintroduction of the bipartisan PACE Act provides Congress the opportunity to help more working families by expanding the Child and Dependent Care Tax Credit and making it refundable to ensure it reaches the families who need it most. We are grateful to these bipartisan champions in Congress for their leadership in introducing this important legislation on behalf of America’s young children and their families.”

"Council for a Strong America (CSA) applauds Senator Angus King, Senator Richard Burr, Representative Stephanie Murphy, and Representative Jason Smith for reintroducing the bipartisan PACE Act in the 116th Congress,” said Barry Ford, President and CEO of Council for a Strong America. “The lack of affordable, quality child care in America is both an economic and a national security crisis, and the PACE Act is the type of meaningful, bipartisan action we need to directly combat this problem. CSA looks forward to working with the cosponsors of the PACE Act in both the House and Senate as this legislation moves closer to becoming a reality for children and families."

“First Focus Campaign for Children supports the bipartisan Promoting Affordable Childcare for Everyone Act (PACE Act) and thanks Senators King (I-ME) and Burr (R-NC), as well as Representatives Stephanie Murphy (D-FL) and Jason Smith (R-MO), for their leadership to introduce this bill early in the 116th Congress,” said Bruce Lesley, President, First Focus Campaign for Children. “As many families struggle to afford the growing costs of high quality childcare, the PACE Act would expand the current Child and Dependent Care Tax Credit (CDCTC) significantly by making the credit refundable.  This important improvement would benefit more low-income working families with little or no tax liabilities. The conversion of the CDCTC from a nonrefundable credit to a refundable one also reflects an important policy change identified in the recently released National Academies of Sciences study, A Roadmap to Reducing Child Poverty, and would help to reduce child poverty so that all our nation’s children have a fair opportunity to succeed.”

More specifically the PACE Act would:

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.
  • Increasing the value of the credit through an increase in the credit rate for families of all income levels and through the creation of 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.

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.

Joining Senators King and Burr as Senate original cosponsors of the bill are Senators Susan Collins (R-Maine), Krysten Sinema (D-Ariz.), Jacky Rosen (D-N.M.).

The legislation has been endorsed by the Save the Children Action Network, Council for a Strong America, First Five Years Fund, Childcare Aware, and First Focus.

For a summary of the PACE Act, click HERE. To read a copy of the legislation, click HERE.

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