Addressing the High Cost of Child Care

March 1, 2001 Download PDF

House Bill 2716, Making the Working Family Child Care Credit Refundable

Executive Summary

Child care affordability is of great concern to many working families with children. The need for parents to find accessible, quality care at a reasonable cost has urgency today. Many single-parent families have been leaving or have been diverted from welfare for work, and from the late 1970s to the late 1990s the share of working families with children who were poor doubled to one out of seven and the number of hours Oregon households work increased.

In 1997, the Oregon Legislative Assembly created the Working Family Child Care Credit in an attempt to address the significant impact child care costs have on low-income Oregonians. Amended in 1999, the law now provides a tax credit equal to up to 40% of child care costs for families with incomes up to 200% of poverty ($29,260/year for a family of three in 2001). The credit phases out as a family's income increases from 200 percent to 250 percent of the federal poverty level.

The Working Family Child Care Credit is “non-refundable.” A family may not receive the credit amount that exceeds the family's tax liability. Families with high child care costs relative to their income (and tax liability) do not receive the full credit established in the law. For this reason, the credit provides substantial relief from child care costs only in theory. In practice, the credit provides little relief for families at the lowest income levels. As it is currently constructed, the Working Family Child Care Credit is regressive over most of the income range. The real rate of the credit (the percentage of child care costs reflected in the credit received) generally increases along with income. Legislation is pending, House Bill 2716, that would make the credit refundable.

The Oregon Working Family Child Care Credit recognizes one of the most daunting challenges faced by low-income working families with children – the ability to afford child care. The credit can provide direct relief for the high cost of child care, a substantial item in almost 50,000 low income working families' budgets. Making the credit refundable as proposed by HB 2716 will get the benefits to those most in need. Families with high child care costs relative to their income will for the first time receive the full benefit of the Working Family Child Care Credit.