The legislation could help lower- and middle-income families save hundreds of dollars a year on their taxes on average and help reduce the costs of childcare for all families.
Pennsylvania House Democrats on Monday approved a pair of tax credits aimed at helping families and reducing poverty throughout the state.
The bills, House Bill 1259 and House Bill 1272, would increase the child care tax credit incrementally to align with the federal tax credit and establish an Earned Income Tax Credit (EITC) for lower and middle-income families.
Under HB 1259, residents would be able to claim the cost of childcare on their tax returns. For tax year 2023, they would be eligible to claim up to $3,000 for one child or $6,000 total for two or more children. Those numbers would then rise in future years, with families being able to claim up to 50% of childcare costs—or up to $5,000 for one child and $10,000 total for two or more—by the beginning of 2027.
HB 1272 would also help reduce families’ tax burdens. In 2020, the average federal Earned Income Tax Credit for Pennsylvanians was $2,091, and if a filer with dependents received that amount, HB 1272 would allow them to receive an additional $523 against their state tax liability, effectively lowering their tax payment by that amount. If the amount of their EITC is larger than a taxpayer’s tax liability, the remaining balance of the credit would be refunded to them.
The bills advanced to the Senate with strong bipartisan support. The bill expanding child care tax credits passed by a 141-62 vote and had the support of over 50 regional Chamber of Commerce chapters. The bill establishing an Earned Income Tax Credit passed by a 122-81 vote.
The United Way of Pennsylvania supports the creation of the earned income tax credit. In 2021, they published a report on the creation of the tax credit stating that for every dollar spent helping lower income and middle income families, the state would generate $4 in economic growth.
“It gives a credit back to the lowest income workers. It really favors families with school-aged children,” said State Rep. Sara Innamorato (D-Allegheny), a primary cosponsor of the bill in previous sessions.
On Tuesday, Reps. Tina Davis (D-Bucks) and Melissa Shusterman (D-Chester) hosted a press conference on the importance of providing child care tax credits for families across the commonwealth.
“The time is now to invest in our working parents,” Shusterman said. “They would like to get back to work, but they need help to get back to work so they can safely, and with confidence, send their children to Pre-K and childcare.”
Davis called the legislation “one spoke in a wheel of things we need to do for working families.”
The cost of providing child care services have skyrocketed since the beginning of the pandemic. According to the First Five Years Fund, almost 85% of parents are spending 10% or more of their income on child care costs, and the Economic Policy Institute estimates that Pennsylvania parents are paying almost $12,000 per year for infant care per child.
There’s also a growing shortage of childcare providers, so parents are left with the choice of facing long wait lists and/or paying the equivalent of a second mortgage for child care costs. Bob Garrett, the CEO of the Greater Susquehanna Valley Chamber of Commerce, described child care as a barrier to employment in the post-pandemic era.
“Fifty-four percent of employers reported to us that they are having problems keeping employees because of the lack of child care,” Garrett said. “Thirty-three percent tell us that folks have had to not give up a job or turned down training for advancements largely because of the lack of child care.”
At the press conference, Rep. Carrol Kazeem (D-Delaware) shared her experiences having to deal with paying for childcare as a single mother. “This barrier makes it difficult amongst many families to work if they are unable to afford childcare. Let alone put food on the table in most homes.”