Bell backs proposal to fix glitch in tax credit for child care
Rich Jones, the Bell's director of policy and research, testified Wednesday in favor of a plan to help more low- to moderate-income Coloradans receive an income tax credit for child-care expenses.
The Bell has long advocated for policies to help working families better afford the cost of child care. We believe affordable care provides greater stability for families and helps them achieve self-sufficiency.
In his testimony in favor of House Bill 14-1072, Jones said, "Helping working families better afford the high cost of child care makes it possible for them to enter and remain in the workforce. Research consistently shows that affordable child care is a decisive factor in promoting work effort among low-income mothers. This helps families pursue careers, advance economically and provide for their children. Families benefit, but so do the businesses that rely on them as employees as well as our overall economy."
House Bill 14-1072 fixes a glitch in the way federal and state tax laws interact and will put average working families, those earning $25,000 or less, on a more equal footing with higher-income Colorado taxpayers who claim the tax credit.
Colorado currently provides a refundable tax credit for child-care expenses for all families with incomes of $60,000 and below. This means that the tax credit is first used to reduce income taxes owed; if the value of the tax credit exceeds the amount of taxes owed, the difference is refunded to the family. Colorado's credit is calculated as a percentage of the federal Child and Dependent Care Tax Credit and weighted so that it provides a higher percentage for lower-income families.
The glitch occurs because the federal Child and Dependent Care Tax Credit is not refundable. Because low- to moderate-income families have limited federal tax liability, many do not receive the federal credit and, as a result, they do not get the state tax credit.
HB 14-1072 will fix this disconnect. The bill passed out of the House Finance Committee on a 7-5 vote.
Click here to read Jones' complete testimony.
Article posted on March 6, 2014