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Tax Credit Refundability and Child Care Prices: Evidence from California

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  • Luke P. Rodgers

Abstract

A common critique of nonrefundable tax credits is that benefits are limited for low-income households. Costs often dominate the refundability debate, yet how much households benefit from refundability depends on the incidence of the credit in question. California provides a unique opportunity to study how eliminating refundability of child care tax credits affects child care prices while holding other policy dimensions fixed. Using county-level price and tax return data, this study finds that nonrefundability corresponds with lower child care prices. If the price response is symmetrical and quality adjustments are limited, refundability may benefit low-income families less than the cost of the program would suggest.

Suggested Citation

  • Luke P. Rodgers, 2023. "Tax Credit Refundability and Child Care Prices: Evidence from California," National Tax Journal, University of Chicago Press, vol. 76(1), pages 95-116.
    • Handle: RePEc:ucp:nattax:doi:10.1086/723229
    DOI: 10.1086/723229
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