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Tax Reform Could Boost Economy With Bigger, Refundable Child Care Credit

October 25, 2017
James J. Heckman
Forbes Magazine

As Congress contemplates a major tax overhaul, it has the opportunity to generate revenue and a healthier national economy by helping parents with the costs of quality early childhood education and care. One important tax credit strategy comes to the forefront as an effective solution: increasing the Child and Dependent Care Tax Credit (CDCTC) to better reflect the cost of care and education and making it refundable for low- and middle-income taxpayers.

The stated goal of many tax reformers is to simplify the tax code in ways that will spur greater economic growth. One effective way to do this is to provide relief to families with young children who have disproportionately high childcare and education expenses at a time when they are struggling to build their careers and incomes. For many single-parent families, the earnings of the mother are essential for family income. Quality childcare costs are staggering and often make work unprofitable, especially for low-wage parents. Low-quality childcare has been shown to harm child development, so that is not an attractive option.

Increasing the CDCTC helps parents afford the early childhood education that will provide their children with a foundation for success in school and life—and provide society with a return on investment in the form of greater productivity.