Commentary by Jared on Childcare and the Child Tax Credit

Commentary published by Vermont Business Magazine May 23, 2023 - As a kid, I grew up in a working class, lower-income, single-parent family and saw my Mom struggle to find reliable and affordable childcare options. More recently, like many other Vermont parents, my wife and I experienced the challenge of finding affordable childcare for our son. This long-standing, intergenerational challenge is long overdue to be addressed.

That is why I am deeply grateful to the legislature for their work to improve and expand access to childcare via Senate Bill 56. The bill would accomplish this primarily by expanding the Child Care Financial Assistance Program (CCFAP), which would reduce the cost of childcare for many Vermont families.

But there’s a catch: to help fund the proposed childcare expansion, the bill passed by the Senate would repeal the Child Tax Credit. What is the Child Tax Credit (CTC)? Quite simply, it is one of the most important tools we have to fight child poverty.

In fact, when the CTC was expanded nationwide during the pandemic and made fully refundable (i.e., families received full payments even if the credit was more than they owed in taxes), the CTC helped cut the rate of child poverty nearly in half, including lifting 4,000 Vermont kids above the poverty line. Building on this progress, the Vermont legislature thankfully created a state-level CTC last session.

Going back on that commitment now and proposing to take away the CTC to help fund childcare expansion is a false choice that pits working class interests against each other. Data show that lower- and middle-income families (those making less than $100,000) used their Child Tax Credits primarily to pay for food, essential bills, and their rent/mortgage.

Repealing one of the most proven and effective tools for fighting childhood poverty should simply be off the table. Budgets and public policies are statements of our values: it would be both bad policy and immoral to take away this needed support for kids and families. 

But we most certainly should expand childcare. So how can we accomplish a childcare expansion without taking away the Child Tax Credit? 

We can simply follow good tax policy and have those with the greatest ability to pay do so. For instance, we could increase the marginal state income tax rates for top earners. Or add back the top tax bracket for the highest-income earners that Vermont had up until 2018. Or go back to having fortunes over $2.75 million subject to the estate tax, as they were until 2019, when the legislature passed and the Governor signed a bill that nearly doubled the threshold for triggering estate tax compliance to $5 million. Or we could levy a wealth tax in Vermont, as Massachusetts has recently done.

One or a combination of these options would be progressive rather than regressive. Thankfully, the House is looking at more progressive options along these lines and I hope the Senate will recognize its error and do likewise.

Because make no mistake: funding childcare expansion by taking away the Child Tax Credit would be regressive and harmful, especially to Vermont’s lowest-income families. Recent analysis by the Public Assets Institute found that at least 8,200 Vermont families (or 42% of CTC eligible households) would be made financially worse off by the Senate plan to cut the CTC to expand childcare.

We need to stop with false choices that would harm the very families we are trying to help. We need to say yes to expanding childcare. But we also need to say no to taking away the Child Tax Credit. We can have both needed childcare expansion and our best tool to fight childhood poverty. We simply need to decide to focus on raising revenue from the most appropriate place: from those Vermonters with the easiest ability to pay (our higher-income and wealthier neighbors) rather than taking away from kids and struggling lower- and middle-income families.