Child care tax credit moves forward despite $20 million price tag
Bill would close loophole that leaves out Colorado’s poorest working families
A bill to help Colorado’s poorest working families pay for child care took its first step towards the Governor’s desk yesterday when it passed out of the House Finance Committee. HB 1072 would close what its sponsors call a loophole in current tax credits for child care that currently leaves out the vast majority families making less than $25,000 a year.
Colorado has the dubious distinction of ranking fifth nationally for the most expensive child care. Just one year of care for an infant costs $12,068, just about the annual tuition at one of Colorado’s public universities. For families living on minimum wage, spending half their income on child care isn’t an option, said the bill’s sponsor, Rep. Brittany Pettersen of Lakewood.
Pettersen’s bill came out of the legislature’s task force on poverty reduction. She says it’s critical for empowering working families to make more money and, ultimately sustain themselves without public assistance.
“This bill will increase self sufficiency by helping parents stay in the workforce while their children are being taken care of and preparing for success in school,” she said.
Of the families that qualify, 62 percent are single moms.
Deanna Jimenez, a 39-year-old raising her with a seven year old daughter alone, testified in favor of the bill yesterday during her lunch break from her job as a medical records technician.
“The passage of this bill would allow me to pay for four weeks of childcare during the five weeks of the summer that she’s off school. It would also give me the ability to pay off my electric and water bills,” Jimenez testified, in tears.
“I don’t receive TANF (Temporary Assistance for Needy Families). I don’t receive Medicaid. I don’t receive any other assistance. But this would definitely help my family. I am a hard working mom and I don’t want to take from anybody other than what is rightfully due me.”
Like other supporters of the bill, Jimenez argued that it is fundamentally about fairness because higher income families already receive a child care tax credit — a policy the legislature has long supported.
In 1996, a Republican measure created Colorado’s child care tax credit to align with a similar federal program. Basically, families get a percentage of their federal child care tax credit as an added return on their state taxes. Combined, the state and federal policies can save a single mother who makes $50,000 a year as much as $660 annually on child care.
But the Colorado Tax credit doesn’t kick in for families who make so little they don’t pay federal taxes. As a result, a single mom who earns just $15,000 a year would receive neither a federal nor state tax credit, even though a mom making several times her salary would qualify:
Supporters described the bill as a loophole closer, not an added benefit to be drawn from the state’s cash-strapped budget.
“If you look at the language [in the initial bill], it says ‘refundable’ and it’s structured in a progressive way in that the lowest income families get the most money on paper. Only in real life they don’t,” said Chaer Robert of the Colorado Center on Law and Policy.
Turning that hypothetical figure into real dollars will put a dent in the General Fund. Legislators from Republican Rep. James Wilson of Salida to Democratic Rep. Jeanne Labuda of Denver balked at the measure because it’s pricey. Even after amendments that would limit the bill’s scope strictly to families who fall into the loophole and would ensure that the tax credit comes up for review in three years, the measure is still expected to cost more than $20 million over those three years.
Labuda said she supported the policy and would vote for it in the finance committee, but that she couldn’t promise the funds will be there in appropriations — a committee on which she also sits.
Wilson, a former superintendent, said he just couldn’t justify spending that much in tax dollars on anything but education right now.
Wilson wasn’t alone in voting no. Although the original Colorado child care tax credit was a Republican-sponsored bipartisan measure, Petterson’s bill passed yesterday on a strict 7-5 party-line vote.
Opponents said that because families in poverty often pay no income tax at either the federal or state level, it’s not fair for the state to essentially cut them a check for child care and call it a tax credit.
Rep. Daniel Kagan of Cherry Hills Village pointed out that families in poverty are nevertheless taxpayers. In fact, he noted, they pay a much higher percentage of their income in both sales and property tax. Since that money also goes back to the state’s coffers, he argued that poor Coloradans have just the same right to a tax credit for child care as wealthier ones.
Said Kagan, “If the middle income people get the tax credit, it’s wrong that the lower income people don’t get it because they pay their taxes in a different form. It’s inequitable, it’s unjust, it perpetuates poverty, it discourages people from working and it’s very high time that it’s stopped and changed.”
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