Paying for Child Care to Work? Evaluating the Role of Policy in Affordable Care and Child Poverty

Unless parents have a family member at home who can provide care, most will need child care in order to work and achieve career mobility. Existing policies to help families with child-care costs in the United States include means-tested subsidies and nonrefundable tax credits. Many low-income families are eligible for the means-tested benefits, yet receipt rates are low. These families are generally excluded from the Child and Dependent Care Tax Credit because it is nonrefundable. We analyze two approaches to reduce child-care expenses for low-income working families: (1) making the Child and Dependent Care Tax Credit fully refundable and increasing its generosity, and (2) providing subsidies to ensure families spend no more than the Department of Health and Human Services affordability guidelines suggest. We evaluate how much such policies would alleviate child poverty through reducing child-care costs and through increasing earnings by enabling parents to work more.