Economy

Pennsylvania House Approves Expanding Child Care Tax Credit to $900

Aman Jain

Published: June 13, 2023 10:05 pm

The Pennsylvania House has approved two bills that aim to give more money to working families. One of the bills approved on Monday aims to expand the Pennsylvania child care tax credit, while the other bill will create a state-level Earned Income Tax Credit.

Why Expand The Pennsylvania Child Care Tax Credit?

On Monday, the Pennsylvania House passed House Bill 1259 (the child care tax credit bill) with a 141-62 vote (39 Republicans joining all 102 Democrats), while House Bill 1272 passed with a 122-81 vote (20 Republicans joining all 102 Democrats). Both bills now head to the Republican-controlled state senate.

In 2022, Pennsylvania instituted the Child and Dependent Care program, which offered a maximum credit of $315 for a family with one child. Now the present bill sponsored by Rep. Tina Davis (D-Bucks) will expand the credit to a maximum of $900 in the first year and then increase it gradually to $2,500 in 2027.

Davis notes that child care costs range from $11,000 to $29,000 annually for Pennsylvania families, depending on the number of children. She said that the Pennsylvania child care tax credit was a step in the right direction but is not enough.

“It is an unaffordable problem that we have to address now,” Davis said. “We need to support our working families.”

According to the bill’s fiscal impact statement, the expanded Pennsylvania child care tax credit will cost about $97.5 million in the next budget and around $1.15 billion combined across five years.

Several Republicans opposed the bill to expand the Pennsylvania child care tax credit. For instance, Rep. Seth Grove (R-York) argued that the state would lose $1.5 billion in tax revenue if this bill becomes law.

Further, Grove said that the program largely assists the wealthy as it lacks an income limit. Citing data from the Internal Revenue Service, Grove noted that 60% of the federal credits claimed in the state last year benefited families with income of over $75,000, while 630 claims were from taxpayers with annual income of $1 million or more.

Bill To Establish State Earned Income Tax Credit

House Bill 1272, sponsored by Rep. Christina Sappey (D-Chester County), would establish a state-level Earned Income Tax Credit for low-to-moderate income working families.

If approved, eligible residents would receive 10% of the federal Earned Income Tax Credit for the current year. The rate would increase every two years and max out at 25% of the federal tax credit. Eligible residents could get about $450 from the state if the bill is approved.

This will ensure that low-to-middle income families who are struggling will have additional income,” Sappey said.

A fiscal impact study estimates the total cost of the Earned Income Tax Credit for four years to be $1.4 billion, while the first-year cost would be $233.5 million.

Those against the bill call it a “dramatic expense” and raised concerns about “fraudsters” who submit erroneous tax returns.

This article originally appeared on ValueWalk