IDEAS home Printed from https://ideas.repec.org/a/sae/pubfin/v50y2022i1p33-61.html
   My bibliography  Save this article

How Would a Permanently Refundable Child and Dependent Care Credit Affect Eligibility, Benefits, and Incentives?

Author

Listed:
  • Gabrielle Pepin

Abstract

The federal Child and Dependent Care Credit (CDCC) subsidizes child care costs for working families. Before 2021, the CDCC was nonrefundable, so only families with positive tax liability after other deductions benefited. I estimate how CDCC eligibility, benefits, and marginal tax rates would change if the credit were made permanently refundable. Under refundability, some 5 percent of single parents gain eligibility and receive on average over $1,000 annually. Eligibility increases are largest among Black and Hispanic households. Increases in marginal tax rates among moderate-income taxpayers are small.

Suggested Citation

  • Gabrielle Pepin, 2022. "How Would a Permanently Refundable Child and Dependent Care Credit Affect Eligibility, Benefits, and Incentives?," Public Finance Review, , vol. 50(1), pages 33-61, January.
    • Handle: RePEc:sae:pubfin:v:50:y:2022:i:1:p:33-61
    DOI: 10.1177/10911421221092053
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/10911421221092053
    Download Restriction: no
    File URL: https://libkey.io/10.1177/10911421221092053?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Herbst, Chris M., 2018. "The rising cost of child care in the United States: A reassessment of the evidence," Economics of Education Review, Elsevier, vol. 64(C), pages 13-30.
    2. Benjamin M. Miller & Kevin J. Mumford, 2015. "The Salience of Complex Tax Changes: Evidence From the Child and Dependent Care Credit Expansion," National Tax Journal, National Tax Association;National Tax Journal, vol. 68(3), pages 477-510, September.
    3. Keane, Michael & Moffitt, Robert, 1998. "A Structural Model of Multiple Welfare Program Participation and Labor Supply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 553-589, August.
    4. Kleven, Henrik Jacobsen & Kreiner, Claus Thustrup, 2006. "The marginal cost of public funds: Hours of work versus labor force participation," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 1955-1973, November.
    5. Dunbar, Amy & Nordhauser, Susan, 1991. "Is the Child Care Credit Progressive?," National Tax Journal, National Tax Association, vol. 44(4), pages 519-28, December.
    6. Hilary W. Hoynes & Ankur J. Patel, 2018. "Effective Policy for Reducing Poverty and Inequality?: The Earned Income Tax Credit and the Distribution of Income," Journal of Human Resources, University of Wisconsin Press, vol. 53(4), pages 859-890.
    7. Nada Eissa & Jeffrey B. Liebman, 1996. "Labor Supply Response to the Earned Income Tax Credit," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(2), pages 605-637.
    8. Raj Chetty & John N. Friedman & Emmanuel Saez, 2013. "Using Differences in Knowledge across Neighborhoods to Uncover the Impacts of the EITC on Earnings," American Economic Review, American Economic Association, vol. 103(7), pages 2683-2721, December.
    9. Michael J. Kottelenberg & Steven F. Lehrer, 2017. "Targeted or Universal Coverage? Assessing Heterogeneity in the Effects of Universal Child Care," Journal of Labor Economics, University of Chicago Press, vol. 35(3), pages 609-653.
    10. William M. Gentry & Alison P. Hagy, 1996. "The Distributional Effects of the Tax Treatment of Child Care Expenses," NBER Chapters, in: Empirical Foundations of Household Taxation, pages 99-134, National Bureau of Economic Research, Inc.
    11. Michael Baker & Jonathan Gruber & Kevin Milligan, 2008. "Universal Child Care, Maternal Labor Supply, and Family Well-Being," Journal of Political Economy, University of Chicago Press, vol. 116(4), pages 709-745, August.
    12. Gabrielle Pepin, 2020. "The Effects of Child Care Subsidies on Paid Child Care Participation and Labor Market Outcomes: Evidence from the Child and Dependent Care Credit," Upjohn Working Papers 20-331, W.E. Upjohn Institute for Employment Research.
    13. Katherine Michelmore & Natasha Pilkauskas, 2021. "Tots and Teens: How Does Child’s Age Influence Maternal Labor Supply and Child Care Response to the Earned Income Tax Credit?," Journal of Labor Economics, University of Chicago Press, vol. 39(4), pages 895-929.
    14. Dunbar, Amy & Nordhauser, Susan, 1991. "Is the Child Care Credit Progressive?," National Tax Journal, National Tax Association;National Tax Journal, vol. 44(4), pages 519-528, December.
    15. Rodgers, Luke P., 2018. "Give credit where? The incidence of child care tax credits," Journal of Urban Economics, Elsevier, vol. 108(C), pages 51-71.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Averett, Susan L. & Wang, Yang, 2023. "Assessing the Fertility Effects of Childcare Cost Subsidies: Evidence from the Child and Dependent Care Tax Credit," IZA Discussion Papers 16263, Institute of Labor Economics (IZA).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gabrielle Pepin, 2020. "The Effects of Child Care Subsidies on Paid Child Care Participation and Labor Market Outcomes: Evidence from the Child and Dependent Care Credit," Upjohn Working Papers 20-331, W.E. Upjohn Institute for Employment Research.
    2. Gabrielle Pepin, 2021. "The COVID-19 Pandemic's Evolving Impacts on the Labor Market: Who's Been Hurt and What We Should Do," Upjohn Working Papers 21-344, W.E. Upjohn Institute for Employment Research.
    3. Kleven, Henrik, 2024. "The EITC and the extensive margin: A reappraisal," Journal of Public Economics, Elsevier, vol. 236(C).
    4. Gabrielle Pepin, 2022. "The effects of welfare time limits on access to financial resources: Evidence from the 2010s," Southern Economic Journal, John Wiley & Sons, vol. 88(4), pages 1343-1372, April.
    5. Elliott Isaac, 2020. "Marriage, Divorce, and Social Safety Net Policy," Southern Economic Journal, John Wiley & Sons, vol. 86(4), pages 1576-1612, April.
    6. Nicardo S. McInnis & Katherine Michelmore & Natasha Pilkauskas, 2023. "The Intergenerational Transmission of Poverty and Public Assistance: Evidence from the Earned Income Tax Credit," NBER Working Papers 31429, National Bureau of Economic Research, Inc.
    7. Marc K. Chan & Robert Moffitt, 2018. "Welfare Reform and the Labor Market," Annual Review of Economics, Annual Reviews, vol. 10(1), pages 347-381, August.
    8. Jacob Bastian & Lance Lochner, 2022. "The Earned Income Tax Credit and Maternal Time Use: More Time Working and Less Time with Kids?," Journal of Labor Economics, University of Chicago Press, vol. 40(3), pages 573-611.
    9. Jacob Bastian, 2020. "The EITC and Maternal Time Use: More Time Working and Less Time with Kids?," Working Papers 2020-077, Human Capital and Economic Opportunity Working Group.
    10. Watson, C. Luke, 2021. "the General Equilibrium Incidence of the Earned Income Tax Credit," SocArXiv 8n3ag, Center for Open Science.
    11. Elira Kuka & Na'ama Shenhav, 2024. "Long-Run Effects of Incentivizing Work after Childbirth," American Economic Review, American Economic Association, vol. 114(6), pages 1692-1722, June.
    12. Claudio A. Agostini & Marcela Perticara & Javiera Selman, 2023. "Tackling Vulnerable Households through a Working Tax Credit Scheme: A Feasible Alternative to Cash Transfers," Hacienda Pública Española / Review of Public Economics, IEF, vol. 245(2), pages 119-155, June.
    13. Anna Godøy & Michael Reich & Jesse Wursten & Sylvia Allegretto, 2024. "Parental Labor Supply: Evidence from Minimum Wage Changes," Journal of Human Resources, University of Wisconsin Press, vol. 59(2), pages 416-442.
    14. Chris Herbst, 2010. "The labor supply effects of child care costs and wages in the presence of subsidies and the earned income tax credit," Review of Economics of the Household, Springer, vol. 8(2), pages 199-230, June.
    15. Jacob E. Bastian, 2024. "The EITC in rural and economically distressed areas: More bang per buck?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(1), pages 136-159, February.
    16. David Neumark & Katherine E. Williams, 2020. "Do State Earned Income Tax Credits Increase Participation in the Federal EITC?," Public Finance Review, , vol. 48(5), pages 579-626, September.
    17. Jessica H. Brown, 2018. "Does Public Pre-K Have Unintended Consequences on the Child Care Market for Infants and Toddlers?," Working Papers 626, Princeton University, Department of Economics, Industrial Relations Section..
    18. Barbara Broadway & Tessa LoRiggio & Chris Ryan & Anna Zhu, 2022. "Literature review on the impact of welfare policy design on children and youth," Journal of Economic Surveys, Wiley Blackwell, vol. 36(4), pages 809-840, September.
    19. Nicole Simpson & Devin Reilly & Kartik Athreya, 2010. "The Earned Income Tax Credit: Insurance Without Disincentives?," 2010 Meeting Papers 1103, Society for Economic Dynamics.
    20. Natalia Danzer & Martin Halla & Nicole Schneeweis & Martina Zweimüller, 2022. "Parental Leave, (In)formal Childcare, and Long-Term Child Outcomes," Journal of Human Resources, University of Wisconsin Press, vol. 57(6), pages 1826-1884.

    More about this item

    Keywords

    Child and Dependent Care Credit; marginal tax rates; eligibility; refundability;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:pubfin:v:50:y:2022:i:1:p:33-61. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.