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The COVID-19 Pandemic's Evolving Impacts on the Labor Market: Who's Been Hurt and What We Should Do

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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, relative to 2020 CDCC parameters set to be restored in 2022. 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.

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  • 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.
    • Handle: RePEc:upj:weupjo:21-344
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    References listed on IDEAS

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    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

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